There are quite a number of insurance products in the market, ranging from Life Term, Critical Illness, Income protection, hospitalization, annuity, saving, personal accident and etc
I am not against any other wealth accumulation policy, but just I believe we can generate better return and enjoy better cash liquidity if we put our money in stock market or equivalent investment vehicle. Always ask about 'SURRENDER VALUE' if an agent is trying to sell you a Saving Plan. =)
There are mainly two type of common policy in market stream :-
1) Investment-Linked Policy
2) Conventional Policy
And the typical differences are shown in the table below:-
Comprehensive explanation can be obtained from the link below :
Investment-Linked vs Conventional
Below are few scenario I would like to share:
"Miss X came is 24 years old, coming from an average family
and has limited income as a junior accountant. She believe she
is the luckiest person in the world and therefore no policy
needed. Misfortune struck when she was diagnosed with kidney
failure, the 'monster' wipe out her entire saving and her
family is burdened with huge medical expenses"
"Miss Y came is 24 years old, coming from an average family
and has limited income as a clerk. She understands the
importances of insurance protection and bough an investment-
linked policy @ RM1500 per annum. She got herself protected
with RM60,000 critical illness & hospitalization life time
limit RM200,000. If the same incident as Miss X struck, she is
definitely in a better financial shape."
"Miss Z bought the same insurance as Miss Y at the same age
and now she is 44 years old. She found out that premium has
been increasing from RM1500 per annum to RM4000 over years
(Sum of insured still RM60,000). Her agent told her that
market is not performing and the premium might be even higher
next year. She asked for quote of conventional policy so that
she can enjoy flat premium but to her surprise the premium now
is RM4500, where she was quoted only at RM2200 at the age of
24 years old."
"Miss A bought a conventional policy at the age of 24 years
old, she paid RM2000 per annum for a RM80,000 critical
illness and RM600 per annum for a medical card. 20 years
passed, she is still paying the same premium at RM2000 and to
her surprise too sum of insured has increased to RM160,000
without a hike in premium"
Investment-Link Policy offers better protection and coverage during young day, very affordable but premium will become ridiculously high when we get older. Your paid premium is divided to a Investment:Protection ratio, for instance 1:9, income from investment activities will use to offset policy premium.
Conventional Policy usually required higher premium and a separate medical card for hospitalization is needed. Not very affordable for young people but more worthy in long term
So which policy suit you ?? For me I would say both ...
Option 1:
- Get a investment-linked policy during young day to avoid overstress of your financial power, include Rider - an option that continue to pay annual premium on behalf of ourself at the event of permanent disability.
- Get another conventional policy when we can afford (best before 30 years old to enjoy lower premium)
- Adjust the weightage of Investment:Protection in investment-linked policy towards investment to generate more return for premium payment. In addition to that, adjust protection portfolio towards Hospitalization.
Option 2:
- Get a conventional policy + a medical card, stick to it until end of our journey. But make sure we can afford the higher premium and not affecting the built up of Long Term Saving & Financial Freedom Account.
Bottom line is we need protection, but don't financially overstress ourself with insurance premium
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