Types of Life Insurance that you should know - SafeLink

Types of Life Insurance that you should know

Life insurance is a contract agreement between you as a policy holder or the insured and the insurance company as a guarantor in which the insurance company will pay a nominal amount of money if there is a risk of death against the insurance policy holder.

You as an insured must pay a number of premiums which will later be useful to provide compensation for your risk of death.

Life Insurance PolicyIn other words, life insurance is a type of insurance that aims to cover people against unexpected financial losses, caused by the insured dies.

Similar to the ownership of health insurance, this life insurance can be purchased for self-interest and on behalf of the insured only or purchased for the benefit of a third person. For example a husband can buy life insurance with his wife as the insured, or parents can also buy life insurance with his child as the insured.

There are several types of life insurance, but before discussing these types of life insurance, it helps you know in advance some of the reasons that make life insurance so important to you.

Why Buy Life Insurance?
1. As Protection Against Loss of Income for Families
Nobody knows what will happen tomorrow, including you. To anticipate the possibility that you will be affected by a disaster and leave the family you care for forever, you will need to buy a life insurance policy so that your family can get coverage for life after you leave.

2. As Protection for Death Risk Due to Diseases of the Main Causes of Death
Based on a survey conducted by the World Health Organization (WHO) in 2002, the 10 main causes of death in Indonesia are coronary heart disease, tuberculosis, blood vessel disorders, respiratory diseases, newborn diseases, lung diseases, traffic accidents, diabetes, blood high, and diarrhea.

These diseases are quite common, so it is important for you to have protection against the risk of contracting these diseases and dying.

3. One Way of Saving or Retirement Preparation
Saving with life insurance is the best alternative choice for your long-term needs because of the nature of regular, mandatory premium payments and is not easy to take at any time.

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Types of Life Insurance
There are several types of life insurance products, which of course each has different benefits. These types of life insurance aim to serve a variety of needs, abilities, and purchasing power of the community.

1. Term Life Insurance
This term life insurance functions to provide protection to the insured within a certain period of time. This life insurance usually offers contracts for 5, 10, or 20 years, with fixed premiums and relatively cheap.

You are recommended to choose this type of life insurance if you prioritize the future of your family, especially children’s education. Suitable for those of you who have a need for large insurance costs but have limited financial capacity.

If you choose this life insurance, some of the benefits are:

  • You as a policy holder get the freedom to determine the amount of premiums according to your ability.
  • The sum insured that you can get as a policy holder can reach millions of dollars. That is, if the insured dies while the contract period is still active, then the insured family will get a substantial sum insured.

Meanwhile the disadvantages of this type of life insurance are:

  • The insured can lose the premium already paid or the premium will be forfeited once the contract is completed if there is no health problem or death until the contract period is over.

2. Whole Life Insurance
This type of whole life insurance provides lifetime protection, although insurance companies usually limit the benefits of protection to only 100 years.

This life insurance is recommended for those of you who do not have dependents and want benefits more than just death benefits, or you are interested in the idea of long-term savings.

So, if you want life protection as well as savings for emergency needs such as paying hospital bills, you can consider buying this type of life insurance policy.

The benefits of this type of life insurance are:

  • It is possible for policyholders to get cash value from the premiums already paid.
  • If you as an insured cannot pay premium installments regularly, you can use the cash value of the premium already paid to pay the next premium.
  • The insurance premium that you have paid will not be forfeited if there are no claims.
  • When the contract expires, the sum insured will be given in full.
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Meanwhile the disadvantages are:

  • The premium is greater than the term life insurance premium, it can even reach more than double that. The reason for this high premium is that the average life expectancy of the community is only 65 years for men and 70 years for women, so the possibility of insurance claims before the protection period ends is higher.
  • The cash value of the total premium paid is not too large because the interest for this insurance is usually only 4% per year, and this figure has not been taxed.

3. Endowment Insurance
Life Insurance ConceptThis type of dual purpose insurance or endowment insurance as the name implies is insurance that has two benefits, namely as a term life insurance as well as savings.

This means you as a policy holder can get cash value from the insurance premium that you have paid in the form of insurance if the insured dies within a certain period in accordance with the policy of the relevant insurance policy and can also withdraw the insurance policy within a certain time before the contract period expires.

This type of life insurance is recommended for those of you who want to ensure the availability of education funds for children, want to have funds for unexpected needs in the future, and want to have a larger retirement fund.

The benefits of this type of life insurance are:

  • As explained above, you can claim this life insurance policy before the contract period expires, for example for your child’s education fund. However, this fund withdrawal can only be done once in a period of several years in accordance with the agreement that has been made.
  • If for example you as the insured are still alive when the time period expires, you will get all the sum insured.
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Meanwhile the disadvantages are:

  • Because this type of life insurance has two benefits, which is like combining term life insurance benefits with life insurance for life, so the premium is quite large, can reach thousands of dollars per month.

4. Unit Link Life Insurance
This type of unit link life insurance combines insurance benefits with investment, and is most often offered by insurance agents. If you are interested in investing but do not understand investment, and want to keep your life protected, you can choose this type of life insurance.

The benefits of this type of life insurance are:

  • You as a policy holder not only get a guarantee of protection, but also investment returns with high interest each year.

While the disadvantages are:

  • The returns from investments are less significant when compared to pure investments such as stocks, money markets, or mutual funds. If you are looking for a large return on investment, you should not rely on unit link life insurance.
  • The sum insured to be obtained is relatively low, especially if the investment fails or only makes a small profit.

Be Careful Before Buying
You need to remember that before you buy a life insurance policy, you are advised to look for as much information and compare offers from several insurance companies relating to the protection offered and the amount of premium you have to pay, and adjust it to your ability.

Also consider the amount of your dependents and what funding requirements will arise in the future in choosing this type of life insurance. The point is you need to do careful planning in accordance with needs before choosing a life insurance product that you will buy, so that the protection benefits you get from the insurance product are optimal. Remember, the principle of prudence before buying also applies to life insurance products so you don’t feel disadvantaged.