Types of Life Insurance
Posted At July 2nd, 2018
There are four types of basic life insurance products that you need to understand before purchasing. Each product has different characteristics that meets the specific needs of the customers.
The following are the characteristics of term life insurance product.
- The term life insurance is an initial and basic concept from life insurance product, that is to protect the client within a certain period.
- Giving life protection within a certain period according to the initial agreement between the policy holder and the insurance company. Usually, the contract term is between 5, 10, 15, or 20 years.
- The premium amount is cheap, flexible, and can be arranged according to the client’s affordability.
- The coverage fund can be of large amount if the policy holder is deceased when the contract is still in active term.
- The premium cash value is redeemable by the policy holder, both when the contract is still in active term and after the contract active term has ended.
- If during the contract term the policy holder does not have any health issue nor is deceased, he or she will still receive the premium cash value.
The following are the characteristics of whole life insurance product.
- Offers protection for up to 100 years or a lifetime.
- Whole life insurance offers protection and also serves as a long-term savings plan.
- The coverage fund is fully redeemable if a risk occurs during the contract term or when the contract ends. Hence, it is suitable if you would like to have savings.
- The policy holder can obtain the premium cash value, payable after 3 years or when the contract ends. However, the amount is not much considering the interest offered is only 4% per year (before tax deduction).
- The premium amount due is higher than Term Life Insurance but it’s give more benefits.
The characteristics of the endowment life insurance are described as follows.
- This product is like term life insurance, but with savings feature. For example, as a children educational savings.
- As savings because it offers cash value redeemable at the end of the contract, or once every few years, with relatively higher amount.
- The premium which the policy holder has to pay is higher compared to other types of insurance because a portion of the premium is allocated to the savings feature which offers premium cash value.
The followings are the characteristics of unit link life insurance.
- Has two functions; as full protection and investment.
- The premium which the policy holder has to pay is higher compared to other types of insurance. This is because the premium is divided into two; the insurance premium and for investment.
- If you allocate a large portion of the premium for insurance, then you can get higher coverage fund. However, if you allocate a large portion of the premium for investment, then you can also probably get higher investment profit.
- It offers higher earnings return.
Which One Do You Need?
Identify your need. Do you only need protection, or also savings, or even investment?
Adjust the other aspects. One of which is of course, your financial situation. Only then should you choose and acquire the suitable life insurance product
In conclusion, it is better for you to first identify what you will need from life insurance.