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Life Protection

Life Protection

Closeup of baby  hand into parents hands. Family concept

When people talk about life protection, they’re usually talking about life insurance. Under a life insurance plan, the insurance company will pay a designated amount of money to your beneficiary in the event of your death. Depending on the insurance plan that you’re taking out, payment can also be made if you become critically ill or disabled – and thus are unable to earn a living anymore. Based on this, it becomes very clear that this sort of insurance can help under certain circumstances such as: –

  • Debt Cancellation – by paying the mortgage or any other debt you have so that your family doesn’t have to.
  • Income Protection – by maintaining yours and your family’s standard of living when you’re not able to work anymore.
  • Education Provision – by keeping your children in their current school, college or university as well as fund future education-related expenses.
  • Death Protection – by helping to pay for final expenses.
  • Legacy Planning – by allowing you to leave the people you love the most with a legacy.

Life insurance can also be a form of savings. How is this so? Most life insurance plans actually accumulate cash value as time passes and as you continue paying your premiums. This cash value can be tax deferred and be a source of funding for your life goals. However, whether this is true or not depends on the type of life insurance that you take out. Let’s take a look at these right now.

LIFE INSURANCE PRODUCT GENRES

As the name suggests, whole life insurance is designed to provide protection for as long as you live, assuming your premium payments are made. The typical maturity age for this plan can be any age from 87 to 99. Some of the key features of whole life insurance plans are:-

  • Premium payments that are guaranteed to remain the same year after year.
  • Guaranteed death and disability coverage with an option to include disease coverage.
  • Guaranteed cash value.
  • Guaranteed increase in protection value; suitable as an inflation hedge.
  • Eligibility for yearly dividends (in order to generate the cash value, the premiums that you pay will be put into an investment fund which in turn, generates dividends. Thus there could be yearly payouts but this does depend on the performance of the fund invested in. This is in a way, similar to the Malaysian Employee Provident Fund (EPF)).
  • A limited pay option (for some whole life insurance plans). Under a limited pay option, you pay a set sum for a mutually agreed upon period of time. Once payment is completed, coverage will continue throughout your life and at the same time accumulate cash value.
  • Options to guarantee the continuity of the plan through waiver and payer benefit options. (A waiver here means that future premium payments are waived. Of course, this will be subject to the conditions of your insurance plan).
  • Options to include early payout critical care coverage.

Given the key features of a whole life insurance plan, how do you know if its right for you? It is if you want to:-

  • Create a solid foundation for achieving your long-term financial goal.
  • Keep your life insurance active for as long as you live.
  • Build a source of funding for life’s emergencies and opportunities.
  • Provide for a loved one with special needs or a child who is not yet independent.
  • Assist aging parents or other family members who require your support.
  • Sustain a business you want to see continue after you’re gone.
  • Create a legacy for your future generation, or for your favorite charity.

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If a whole life insurance plan is good for the span of your entire life, a term insurance plan provides coverage for a specific period only or up to a certain age. A term insurance plan also has little to no cash value.

Now if you’re thinking that a whole life insurance plan is a lot better, you’re jumping to conclusions because this isn’t necessarily so. A term insurance plan is more affordable compared to a whole life insurance plan. Here are some more key features of a term insurance plan:

  • Premium payments that are guaranteed to remain the same year after year.
  • Guaranteed death and disability coverage with an option to include disease coverage.
  • Low entry premiums.
  • Flexibility when it comes to choosing the terms of your coverage.
  • Typically has an option to convert to whole life insurance.
  • Coverage ends after a specified period.

Given a term insurance plan’s key features, who is it suitable for? Well, you should consider a term insurance plan if you’re looking for:-

  • A high level of coverage even when you have a tight budget.
  • Protection to meet shorter-term needs.
  • A policy that can be customized.
  • A top up to an existing insurance’s coverage.

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An investment-linked insurance plan (or ILP) provides you coverage just like any other insurance plan would, but unlike other plans, has access to a professionally-managed unit trust fund. Typically, an ILP combines the convenience of a term insurance plan with the earning potential of a unit trust investment vehicle.

An ILP is usually very flexible because it consists of a basic plan and  riders. While the basic (death+tpd) plan is fixed, you can choose from a wide array of options for the rider, where you’re able to vary the level of protection and investment. Because of this, there can be an ILP for virtually anyone – from as young as 30 days old to as seasoned as 65 years old. Premiums too can be very affordable; some start from as low as RM100 per month. . Let’s take a look at some more of an ILP’s key features:

  • Guaranteed death and disability coverage with an option to include disease, medical and accident benefits.
  • Low entry premiums.
  • Has an investment portion where a part of the premium is directed to a unit trust fund. This investment can be a potential inflation hedge.
  • Option to select your own unit trust fund in accordance to your risk appetite and investment goals.
  • Option to set your own protection coverage and investment level.
  • Options to upgrade so that you have additional coverage or upgrade to the latest coverage plan. (If your ILP has medical benefits attached to it, upgraded coverage is typically subject to medical evidence)
  • A limited pay option. Many ILPs offer the option to pay for either 5,10 or 20 years for a 30-year coverage term.
  • Option for a premium holiday. An ILP offers you the convenience of deducting your insurance (protection) costs from your investment account, allowing you to “take a break” from paying your premiums.
  • Flexibility in terms of withdrawing your investment.
  • Unique investment protection benefits such as waivers.

Now that you know what an ILP’s key features are, should you go get an ILP? You should if you want to:-

  • Create a comprehensive plan for your long-term financial goals.
  • Keep your life insurance relevant and up to date for as long as you live.
  • Have high coverage with low premiums.
  • Make your money work harder for you.
  • Have more control over your insurance and investment portfolio.
  • Protect your investment goals.
  • Have a fixed premium payment term with long term coverage.
  • Have the flexibility to withdraw a portion of your investment.

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TESTIMONIALS

Today I have two plans, one comprehensive life protection plan and another which is special Cancer Plan. so far, and am always open to Joshua's advice and recommendation as I believe he has the best of intentions and holds my best interest at heart...Read more

Kathleen Marie Fernandez - Project Manager & Trainer at Enfiniti Academy

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