Life Insurance as Protection as well as Investment

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The words or terms “Life Insurance” you may have heard often. But what exactly is the contribution of life coverage?

Life insurance is a risk transfer (risk transfer) if there is a financial loss caused by death, accident, permanent disability, or critical illness. The financial loss in question can be ascertained to occur if an economically productive person faces the risks mentioned earlier. Especially if the risk occurs suddenly / instantly.

Someone who was productive as unproductive anymore will certainly cause financial impact, not only for themselves, but also for people who have interests in themselves, generally the people closest to them. For example: a person who was productive, if forced to face critical illness, will certainly lose his productivity, not without may have to give up the loss of assets that have been collected over a long period of time, even become a financial dependent for others.

This kind of thing is what is tried to be minimized using the “risk transfer” method. That is, the insurance contribution company can replace the value of a person’s loss (or income) as much as the sum insured. This sum insured can be paid at once or paid in a patterned manner, depending on the policy / scheme of each insurance product.

A person who is a relative participant of life insurance dues pays a dues coverage that is much smaller than the sum insured. Of course, it must be so, because if it is not, of course, it becomes a product that is sold, it will not feel the benefits for prospective buyers. How can this be done? Because premium companies collect insurance based on many people who have the same interests (facing the same type of risk) and then, after statistically calculating the mortality / death rate and or other specific risks of this group of people, the insurance company can determine the value of the coverage dues. The more poly participants can be collected, the smaller the premium value.

With the correct calculation, both participants and insurance companies should benefit equally. Or in more appropriate terms: insurance companies benefit businessly while insurance participants get benefits according to their needs.

But what will happen if the insurance contribution company miscalculates? The liability fee company will lose money, not infrequently until there is an unpaid claim. Because it is relatively crucial to see whether or not a sum insured value compared to the premium, as well as the track record of a company.

For ordinary people, it may feel that it is not easy to judge whether or not a sum insured is reasonable. One of them is because at this time there are many options available. Therefore, for people who make decisions by comparing various choices, it is necessary to understand more about the types of life insurance contributions. If you belong to someone like this, please follow the other pen strokes that will follow in this blog.

Some types of insurance that combine protection & investment (especially unit links) can be observed to be “savings with protection incentives” or “buying protection without losing money”.

A unit link participant “saves” by buying premiums on a regular basis. Actually, there is an allocation of protection and investment in the coverage dues paid. Then the coverage contribution company develops investments from the funds collected earlier as a result of the growing portion of investments that can finance one’s protection needs. Therefore, the money paid as insurance is not lost, instead it can produce better profits than the inflation rate.

It has been proven that the application of such a procedure is of interest to poly people. That’s why link units are increasingly offered compared to traditional soul premiums.

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