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2. How to Choose Insurance Plan for
Yourself and Your Loved Ones
3. If you're new to the 'World of Insurances', you may not know what insurances
to purchase. Some may buy it because the agent's is their friends or relatives.
It could also because they want to help the agent's meeting his/her production
target rather than fulfilling their insurance needs. Whatever the reasons are, it
end up that their first insurance plan may be differs from their actual needs.
Most established insurance firms carry out needs analysis session of their
potential clients first before recommending any relevant products. The
analysis is to understand the potential client's ASPIRATION, CONCERN and
FINANCIAL STATUS before an appropriate proposal can be drafted to meet
those needs. Only after the relevant info has been collected, can an insurance
consultant work towards addressing the client's needs.
Introduction
4. This is the most basic plan for everyone. You can have a higher coverage at
the lowest possible premium. Of course, the premium depends on your age at
inception of the policy and your medical status. Generally, such plans only
provide coverage against death (regardless of the cause) and total and
permanent disability. (The definition of total and permanent disability varies
from firm to firm.) This plan is also known as 'pure' insurance - it only pays
based upon the Principle of Indemnity (paid only if there is loss). As the name
applies, "Term Plan" has its expiry date, for example, 10, 15, 20, 25 or 30
years from the date of inception or it is tag to the insured age till 60, 65 or 70
years old. If the insured terminates the policy earlier, the premium payment
will stop, and so does the coverage.
Term Plan
5. Whole Life Plan
Most working adults would like to have this plan. If you plan to own one, start this
plan at a younger age as the premium is much lower. The premium to this plan
will be fixed throughout your lifetime (except for addition of riders). It gives you
the basic protection against death and total and permanent disability. Whole Life
Plan is usually a 'participating policy' which means the amount of protection will
grow (increase) over the years as the Investment Insurance Plans 'invest' part of
the premium and give it back to the policyholders through dividends or an added
coverage. The amount of dividend paid will fluctuate with the insurance
company's investment performance. Although this plan has a 'Cash Value' -
which is the amount to be paid out in cash upon its termination, early termination
may result in losses and therefore not recommended. As a 'Rule of Thumb',
policies in force for more than 20 years will have cash value higher than the
premium paid. Some of this plan also come with limited payment term whereby
the insured only need to pay a certain period, say 15 or 20 years but yet having a
lifetime coverage.
6. Saving or Endowment Plan
As the name implies, this plan is more for those who want to save for certain
purposes such as wedding, buying a house, further studies, etc. One thing to
note is for the plan 'to grow', it requires time. Therefore, this plan works well if
your purpose is building fund for your child's education, planning your own
retirement or anything whereby you need cash 18-25 years down the road.
Short term planning may not be feasible. This is also a participating policy and
has cash value. Once the plan has reached its maturity, the whole policy will
pay out and your coverage ceased. You cannot extend the period any further.
Therefore, you need to plan properly before taking such policy.
7. Insurance companies also promote investment plan for its policyholders. If
you're competent investor in stock market yourself or other form of
investment, I is best you avoid such plan and invest on your own. This is
because Investment Insurance Plans has more charges - insurance charges
and investment charges. Investment charges include bid-offer spread, annual
fund fee, top-up fee (if any) and other distribution charges. The insurance
charge is deducted from the units that you bought and is calculated on
monthly basis. Furthermore, you will be subjected to the fluctuating unit
prices. The only difference is that should there be a claim on death or total
permanent disability, the amount paid up will be the sum of insurance
coverage and the value of your underlying units.
Investment Plan
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