Life insurance is a specialised field and can be complex to understand. Hence, my advice is to talk to an insurance agent and ask all the questions on an insurance proposal.
Since posting on the subject matter, some responses came through. Let me address them. I wrote from the context of Singapore environment and there are newer insurance products introduced by some insurance companies. Keep a lookout and see whether these products suit your needs.
Life insurance is an important part of personal financial planning (PFP). Its major role is for protection with another purpose of disciplined savings. I understand one does not hope to suffer from fate of total permanent disability (TPD) or worse still death and require the need to invoke the insurance coverage.
The premium paid goes towards insurance company providing sum insured coverage on life of an assured. It’s easy to overlook this part. If one focuses on the savings plan portion of the policy, yearly bonus/profits and maturity payout, the returns is low and may not cover inflation rates over the years. We must see the insurance policy in its totality, both the protection and the savings components. The benefits from insurance coverage cannot be viewed in a tangible way as the bonus, cash surrender value or maturity sum to be received.
I bought travel insurance before each travel, even to Malaysia. The sum I pay goes to protect my family in case I get into life threatening problems. This provides me a peace of mind. The sum paid is worth it even if it expires after the travel. That is the nature of insurance.
Even if the assured has no dependant, life insurance is still necessary. In case of total permanent disability suffered, one may not be able to work and hence there will be loss of employment income. Insurance payout can help one financially. One may buy term policy instead of whole-life policy. The former has a lower premium and if the policyholder survives the fixed term of policy, there is no payout at the end of the term.
Insurance is a big topic. Insurance companies have been innovative. They are increasingly introducing savings and investments plan products. One’s insurance needs change when one gets to different age groups and different life events, e.g. having a new child, reaching retirement. And finally, one has to structure insurance needs based on one’s financial position. This can cover question such as: “What amount is adequate coverage?”
Copyright © 2012, limkimtong for Living Investment
The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.