Basic principle of Life Insurance

Dearest buddies,

Understanding A Traditional Policy (most common product).

There are 4 basic type of Life Insurance :
1) Whole Life - Balanced
2) Endowment - Most expensive
3) Term - Cheapest
4) Investment Link - combination of unit trust and term

Basic principle of Life Insurance

Life Insurance => Would you agree that a Life Insurance Policy is an ASSET (similar to a house)? YES or NO

Answer is YES, it is an asset but an asset that would only be given to you on certain conditions. They are "Death" and "Total Permanent Disability".

To me it is just a piece of document, not like a property that it provide me shelter or car that provide me transport. When I bought my insurance from my friend, I did not really understand what I bought (that's me .... hee hee), I bought it because I trust her and support her. All I can think of is that when I die it will benefit my next of kin. Is this what you all are thinking when you buy insurance ?

In addition to this Life Insurance asset, you have the option to add riders or supplementary benefits, such as
accident (similar to a chair),
Hospitalisation & Surgery (similar to a table)
and 36 Critical Illnesses (similar to a closet).

They are likened to the furnishing in a property.

However these riders/supplementary benefits have 3 disadvantages :-
1) Age Limit - because as you get older are you getting healthier ? What is your risk of getting one of the 36 Critical Illnesses after the age of 55 ?

2) No returns - The nature of riders are similar to general Insurance products (ag. car insurance). You pay a premium, but at the end of the insured period, if no claim is made, the premium is forfeited. There are no bonuses whatsoever.

3) Redundancy
Scenario A (Year 2009)
In year 2009, if you were diagnosed with one of the 36 CI, how much will you be able to claim ?
Note: A critical illness claim is a one time claim event only.

Scenario B (Year 2029)
Assume nothing happens to you in year 2009. However, if u were diagnosed with one of the 36 CI 20 years later (year 2029), how much would you be able to claim? What is the value of claim in year 2029?

Have you ever heard of people complaining that the return from their policies are very low?

It could be because : They bought a small house (asset) but big furniture (riders).
As 36 CI strike me, the rider amount I bought was RM50K, and I get RM54K as part of my INCOME.

Similar to the traditional policies, the products also consists of an asset and its riders.
The good news is 36 Critical Illnesses are already included in the "HOUSE" (Life Insurance asset).

These differences will give you 3 advantages:
1) No Age Limit (87 years)
This means that the policy will mature at age 87, In other words, when you reach age 87, the whole house (sum assured) at its current value, will be payable regardless of your state of health.

2) RETURNS - Double Bonus
The first bonus you earn is from the house (asset) and the second bonus will come from the fact that you no longer have to pay for the 36 critical illnesses furniture, because it is included in the house.

3) HEALTH down HOUSE up
As the years progress and your health deteriorates, the value of the house (asset) will increase in value.

Summary of traditional and 2009 products

Traditional policies were originally designed to benefit your next of kin after you are gone - You will only get the money when it's too late!

This new type of policy is designed to benefit you while you are alive! - Wow Just in Time, you will get money when you need it most!

Therefore purchasing this policy is natural upgrade to complete your protection.

Cheers.
Michael Gan
PS Happy reading.