There are so many types of life insurance policy in the market. Currently there are 16 life insurance companies in Malaysia and most of them provides more than 10 products. So how do you choose your first insurance policy to buy?
Most likely when you are approached by an insurance agent, you are presented with Investment-linked policy. It actually makes sense to buy investment-linked policy as the first policy you should own. Here are the reasons and advantages:
Transparency – Unlike the traditional policy such as whole life or endowment plan, an investment-linked policy reveals all your premium allocation clearly. This is what I call transparent policy – you can actually understand and see where your premium is used. Policy holder will receive a periodic statement that clearly and precisely lists all the premium allocation, relevant insurance charges, investment value and fund unit price. I owned both Great Eastern investment-linked policy and AIA investment-linked policy. Great Eastern sends me the report quarterly (every 3 months) and AIA is only once a year. Prudential also sends the report once a year. Besides this report, you will also get the investment-linked fund performance report annually. If you didn’t get the report stated above, please contact your agent. There is something wrong somewhere 🙂
Low insurance charges – For fresh graduates, age around 23-25, it is normal for them to seek their first insurance agent and also the first insurance policy. When you are young, insurance charges are very cheap. Investment-linked policy calculates the insurance charges based on your age. They use a mortality table and clearly provide the insurance charges table in the policy. This means you can purchase high coverage with low premium when you are still young. Sometimes, the premium is even lower than a term policy.
Flexibility – Once you get older, promoted, married, have kids, your protection needs eventually increase. When you retire, your kids are independent, your protection needs eventually decrease. Looking at this circumstances, investment-linked policy provides the flexibility to increase or reduce the premium, include or exclude certain coverage rider, supplementary benefits and sum assured. Put it simple, you can modify this policy whenever and however you want it to be.
Integrated better health card – some insurance company like Great Eastern and Prudential, they provide better hospitalization and surgical benefits only for investment-linked policy holder. For instance, Great Eastern lets the investment-linked policy holder to include Health Protector (no co-insurance, cheaper insurance charges) in his policy. But if you only want a health card, Health Protector is not available to you. You would have to get a standalone card which is higher in premium and normally comes with co-insurance payment (means patient have to share the medical bill).
All-in-one benefits – All sorts of coverage can be included into your investment-linked policy. This includes accidental benefit, hospitalization income benefit, living assurance, critical illnesses benefit, health card benefit, lady care benefit etc. Almost all available protection riders can be included. You will find it easier and cheaper to have one insurance plan that can give you all the possible benefits you need.
You control the investment strategy – Did you ever think that investment-linked policy is risky because it involves investment? Actually, you have the right to control the risk you can bear for your investment. You can choose which fund to invest, which strategy to use, which portfolio allocation to apply, and even when to do the switching from fund to fund which is normally free of charge. If you are skeptical about investment risk, just put all your premium into a fixed-income fund!
Investment-linked vs. Traditional Insurance
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