What’s the purpose of life insurance? Do I need it if I’m young? Can I buy it when I’m old? How much coverage do I need? While you may have a life insurance policy, there is a possibility you are not making the most out of it and are underinsured.
We answer the most frequently asked questions when buying life insurance.
What is life insurance for?
Life insurance is protection against the financial impact that a person’s family may experience in the event of that person’s passing OR a Total & Permanent Disability (TPD)
The amount called the payout can be used to cover:
The loss of income
The payee's debt
What are the Different Types of Life Insurance Available?
A Term life insurance provides coverage for a set period (the “Term” of coverage)
It is the least expensive form of life insurance for people under the age of 50
It is the most basic policy with no cash value (i.e. no returns on maturity/surrender of policy)
WHOLE LIFE INSURANCE
A Whole life insurance provides coverage throughout a person’s lifetime
Premium payments are higher than term life policies, but premiums do not increase with age
It offers a guaranteed cash value/return upon maturity or surrender of policy
You can build tax-deferred cash values with whole life insurance (i.e. only pay the tax on the insurance in the future)
INVESTMENT LINKED INSURANCE
An insurance plan that also has investment capabilities
Premium payments are divided between payment for the life insurance and investments in funds that you can choose
You can also invest more when you have extra money or withdraw from your investment funds if required
What is a Takaful Plan?
Takaful is a type of protection plan which abides by Islamic or Shariah rules on finance. Members contribute money into a pooling system in order to guarantee each other against losses or damages incurred.
What affects my premium?
A premium is the payment you make periodically for your insurance policy
Certain factors affect the amount of premium you pay for your insurance:
The younger you are when you purchase the life plan, the more affordable it will be
RISK OF OCCUPATION
High-risk occupations have a higher premium tied to it
Certain factors such as smoking, BMI, etc will affect your eligibility and premium rates
TYPE OF POLICY
Your premiums will depend on the length of your policy term and the amount that you are covered for
How do I calculate how much coverage I need?
The amount you are covered for is set at your time of purchase but can be adjusted as you grow in age
As a rule of thumb, you should reassess your coverage if your lifestyle has changed, for example, if you recently got married or have a child on the way
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