Business to Insurances

Know Your Types of Insurance

In Indonesia, a type of insurance is divided into two major types, traditional insurance and non-traditional insurance. Traditional insurance is divided into three types. Term life insurance (term), whole life (whole life), and endowment (endowment). Do not dizzy before with these terms. Let us discuss them one by one.

Term insurance provides protection only within a limited period only. Protection can be as short plane ride from Jakarta to Semarang or for 20 years. If there is no risk, the insurance money is not returned or forfeited. This type of insurance has the cheapest premiums among other insurers. The coverage can be huge money, billions with a premium that is not breaking the bank too. Type of term life insurance has no cash value. If at the expiration of insurance contract the insured is still hale and hearty, the contract expires and no money is given to the insured.

Maybe a lot of people who think buying a term life insurance a waste of money because there is no money available if the contract expires and the insured does not die. But, whoa, are we not more grateful for endowed health and longevity? Similar to hire security guards to keep the house from theft in one night. If the theft does not happen on that night, if we can pull back the salaries of security guards the next morning? Should not we be thankful for our homes safe?

The second type is a whole life. This insurance contains the value of savings. Protection period was longer, up to 99 years. This insurance is referred to as a refinement term life insurance with no cash value. On whole life insurance, when the contract expires and the insured is still hale and hearty, no cash value is given.

Risk, the premium paid is more expensive because of the risk of a claim definitely happen. There is rarely a healthy person up to the age of 99 years, right? In Indonesia, the life expectancy of men 65 years and women 70 years of age. Cash value whole life policy can be used as collateral for loans, and there is a bonus dividend of the company for the whole life policy holders. Moreover, if it can not pay the premium, the policyholder may withdraw funds from the cash value. This feature does not exist on the type of term life.

Unfortunately, interest from savings invested much lower than the interest rates on the market. Savings in whole life insurance provides only about 4 percent interest per year, has not reduced costs and taxes. When buying a policy, the cash value looks great. However, try to recalculate the real inflation factors include general average of 12 percent, the cash value will be eroded and become smaller when the policy matures.

Insurance "endowment"

This insurance is term insurance product that has a dual advantage. Nature such as term insurance as well as savings. This product is very popular before the advent of unit-linked products.

Diverse forms of endowment insurance. There is a bonus that comes up regularly, for example, 3 years or 5 years. Premium endowment insurance is much more expensive than term insurance or whole life. Prestige of endowment faded with the rise of unit-linked. Moreover, because the royal bonuses, endowment insurance costs actually burdensome insurance company.

Insurance "link unit"

Unit linked insurance is nontraditional. This is insurance with two pockets, pockets and pouches for protection of investment. The premiums paid partly used to pay for protection and partly placed in mutual funds in the form of a link unit. Policyholders will be asked to choose where to put their investments, whether in equity funds, mixed funds, fixed income funds, or money market.

Closely related to unit-linked capital markets. This product is quite complex and not easily understood. Policyholders should really pay attention and learn this product.

Source: kompas.com