Am I Buying The Right Insurance?

For a fresh graduate, insurance is a topic that we may not think or talk about. However, it is important to understand that insurance planning is an integral part of financial planning. Not planning it well can cause possible financial headaches and heartaches in the future. In this article, we bring you through the different types of insurance.

Life Insurance

Most of us know that life insurance pays out when we die (or when we are permanently disabled/ critically ill). These days, insurers have many financial products in place that meet this specific need. Here’s a breakdown of the types of life insurance policies:

Whole Life Insurance

As the name suggests, this is protection for the whole of life, which provides payment of the policy’s face value (plus bonuses, if any) upon the death of the insured. Although a Whole Life Insurance policy emphasizes protection, it also has some form of savings element (which you may choose to receive should you decide to surrender the policy). One can also choose between paying the premiums throughout the whole life or for a limited number of years (Limited Premium Payment).

Term Insurance

Term insurance, on the other hand, provides life insurance cover for a specified period of time (such as 20 or 30 years). Buyers usually buy this when they need temporary insurance protection. For example, when their child is still financially dependent on them or when one wants to cover existing financial obligations such as mortgage loans and other debts so as not to burden your loved ones if they were to be out of the picture.

The decision to purchase a whole life or term is a personal choice and would depend on your finances and coverage goals as whole life insurance are more costly compared to term insurance.

Investment-linked policies (ILP)

An ILP is a life insurance policy, which provides a combination of protection and investment. Premiums paid are used to buy life insurance coverage and investment units in an investment fund, usually managed by the insurer or external fund manager.

Buyers usually buy this when they want both insurance protection and to also benefit from higher potential returns from the investment. There is also greater flexibility in insurance coverage. This means that one can choose to vary the level of insurance coverage to meet his or her individual protection needs without any increase in premiums (may be subjected to insurer’s underwriting approval). Such scenarios may happen when you have a newborn baby. Another ILP feature is the premium holiday where one can temporarily stop your premium payments while still enjoying the insurance coverage under the policy.

One point to note about ILPs is that there is no guaranteed cash value since the value of the ILP would depend on the performance of the investments. Hence, it is important to consider one’s risk profile and investment objective as it varies from individual to individual.

With so many different types of life insurance policies in the market, there is no one best policy for everyone. The policy you choose should be based on your individual goals and needs. Ask yourself why do you need this and what do you want to achieve before making an informed decision by considering the benefits, features and coverage of the different policies available. Remember; choose the policy that you are comfortable with and one that aligns to your goals and needs. Ultimately, you should not buy an insurance policy you do not understand. Seek the advise of a qualified financial advisor whom you can trust to help you with your financial planning.

Health insurance

There are many health insurance policies that can help you with your medical and/or hospitalization costs. Depending on you needs, here are the health insurance policies you can consider.

Get your health insurance while you are still young and healthy. Many a times, we only think of insurance when we fall ill or developed some health conditions. When that happens, your coverage for the health condition may be excluded.

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