I gain
the idea of writing this post when I realized that there is a certain group of
people, consist some of my friends, who do not know insurance deeply. What they
know is just that insurance is used only when a person dies. Note that this
post is not for advertising any insurance plan for you to purchase, but to
share my experience and opinion on what I personally know about insurance.
Do you
know that there are two types of insurance available in the globe? In this
post, we are not going to cover the two major categories of the insurance since
I am sure that it had been well-known by you. Here, I would like to further
narrow into the two major types of life insurance in specific.
Misconceptions on
Life Insurance
The
most common misconception that I heard from my friends is life insurance always
needs purchase and you will lose everything when you are still alive. This is
why a lot of people do not want to buy life insurance. They even avoid from the
agent from promoting the insurance plan to them since for them, life insurance
is just about wasting money. The misconception also occurs when some of the
people just buy an insurance with the too low of premium which results in the
lower compensation to the beneficiaries when the holder of the policy dies.
Indeed, life insurance at least provides certain amount of money as the source
to finance the funeral of the holder and to pay the unpaid debt owed by the
policy holder.
Another
misconception which needed to be changed is the life insurance is of no
different with the general insurance. People are often confused with the term
life insurance when they mismatch with some types of general insurance which
are quite alike to life insurance, which is medical insurance. You will be
shocked when you see that a person can go to claim money for himself when he
just gets injured. He thinks that life insurance is going to cover everything
that he losses in his life. This is the true story that an insurance agent told
me when I had a conversation with her. Indeed, the life insurance that you and
I know from the birth is all for the beneficiary, never for the policy holder. Therefore,
hopefully through this post, there will be a little change on your knowledge on
what actually a life insurance is.
Types of Life
Insurance
In
general, life insurance can be divided into two types, namely the term life
insurance and the term endowment life insurance. The major difference is the
benefit that the policy holder will obtain from the purchase of the life
insurance. For term life insurance, if the policy holder is still alive at the
maturity date, then the beneficiary will not receive any benefit from the
insurer. Instead, if the policy holder dies within the coverage period, then
only the beneficiary will receive some certain amount of the benefit as stated
in the agreement. Whereas, for term endowment life insurance, the beneficiary
can be the policy holder himself or herself. This is totally different from
term life insurance where the beneficiary will never be the policy holder
himself. For term endowment life insurance, the beneficiary of the policy will receive
benefit no matter the policy holder dies within the coverage period or still
alive at the maturity date. The benefit that the beneficiary receives will be
more if the policy holder is still alive.
By
comparing the two types of the life insurance, you may first think that the
term endowment life insurance is better than a term life insurance. However,
since the benefit of the term endowment life insurance is much more than the
term life insurance, the premium for the term endowment life insurance is much
higher. For example, the annual premium of a term life insurance is around
RM400 (for AIA) while the annual premium of a term endowment life insurance is
RM2400 (for Great Eastern). For term life insurance, the insurance policy will
be terminated if there is no premium payment made. While, for term endowment
insurance, a certain percentage of penalty will be charged on the accumulated
fund if premium is not paid. The policy holder may be forced to surrender from
the term endowment life insurance plan.
Personally,
I would rather recommend a term endowment life insurance instead of a term life
insurance especially for students like you and me. This is because we can
guarantee the fund, maybe used as the education fund for our children or the
retirement fund for ourselves when the plan matures in 20-30 years. Even though
the premium is quite high, I am sure that, by reducing daily unnecessary expenses,
you can easily accumulate RM2400 in a year.
I hope
that you are benefited from my writing.
2019-12-03
3.40pm
