How to Choose the Best Life Insurance

As something quite complex, how to choose life insurance sounds a little existential about life even though it is the truth. Those we will leave behind – as well as ourselves – must be prepared for the worst possible scenario, which is death. Over the past few decades policyholders have declined by 9% so that by 2020 only 54% of adults have life insurance.
The phrase ‘life insurance’ itself does not sound foreign but in fact, many people do not understand the ins and outs of this. So, to understand the importance of this, this article will try to discuss further about life insurance so that we can understand at least the basics and how to choose it.

Definition of Life Insurance

Life insurance is a contract between a customer and an insurance company in which the customer is willing to pay insurance premiums in return for the insurance company’s commitment to pay a certain amount of money – called allowances. – to people the customer has chosen after the customer dies. The people who receive the benefits are also called the beneficiaries of the sum assured or may be the heirs.

Life Insurance Function

Financial protection through life insurance can be used as living capital for families or beneficiaries when the customer dies, but apart from that, there are several other functions of life insurance, namely:
Cover funeral expenses, unpaid medical expenses, education debts, or other outstanding debts during life so that beneficiaries do not have to bear these burdens. Leave wealth and inheritance to family or spouse in order to maintain their usual lifestyle. Pay taxes the land so that beneficiaries do not have to use the inheritance to pay the tax. Beneficiaries are tax-deductible when they receive death benefits – even get a free benefit mortgages and other debts when the lender needs them.

Types of Life Insurance

Life insurance can be classified into two, namely term and permanent. Term life insurance has a choice according to a certain period of time that has been provided by the insurance company. As for permanent life insurance, the term is for life. Even so, some companies that offer whole life insurance only apply insurance plans until the customer is 65 years old.

As customers, we can only choose one type of policy. Here are the types:

Term life insurance – as the name implies “terms” this insurance is only purchased for a certain period of time. Usually the term is for 10 to 30 years, after which the insurance period ends. However, we can also convert this life insurance to permanent so that it can be continued until an unwanted event – ​​death – comes to us. This term insurance is the cheapest option with other types. Life insurance – called for life because it will be valid for as long as the customer lives, usually the maximum limit is 100 years. The customer will pay the premium as long as this insurance is valid. When customers stop paying premiums, usually the insured money can be returned. This insurance includes permanent.Universal life insurance – this insurance has a distribution concept where customers can use money for their savings and life insurance. In short, the premiums paid for life insurance as well as savings. The savings in this insurance are usually invested so that they earn interest and the customer can withdraw this money. This insurance includes permanent life insurance.

In addition to the 3 types above, there are also differences between Islamic and conventional insurance. The two types differ in the way they are managed and the benefits provided.
With these choices, before making a decision, of course we need to think about it carefully. Considering whether issued for the insurance in accordance with our financial situation.
As we get older, we may be able to combine permanent and term life insurance at one time, but still the best option is to adjust our financial situation and our ability to pay for the insurance.

Life Insurance Conversion or Combination

As mentioned in the previous paragraph, maybe we can choose a combined life insurance. Yes, this insurance provides many options for getting payments other than death benefits. Because of the popularity of this type of insurance, many people combine it with other policies such as combining life insurance with long-term care (health) insurance. Life Happens conducted a study in 2019 and found one in five Americans stated that they are more interested in buying combination insurance products.
Convertible life insurance allows us as customers to change the type term life insurance becomes permanent or lifetime instead of losing term life insurance – because if the specified period has expired, the money will disappear – so customers who want to convert life insurance no longer need to do a health check like they did when they first bought insurance. soul.

Pros and Cons of Life Insurance
Like everything in this world, life insurance has the following pros and cons:

Pro

Securing wealth or finances so that the customer will feel at ease if at some point he leaves his family The use of funds resulting from the death benefit by the beneficiaries can be used flexibly – not regulated by the insurance company – Fixed premiums so that customers can know the budget Permanent life insurance that helps customers Having savings through investment allows customers to easily borrow funds from the money at a later date if it is very difficult Term life allows a fairly vulnerable loss because if the time period runs out and the customer is still alive, the premium paid cannot be taken back. Universal life insurance which allows customers to pay premiums into savings as well as life insurance will not provide investment options with high yields. When the customer is not willing to pay the premium, the life insurance policy will be canceled then the customer must take a new life insurance policy according to the current customer and perform a new health check – which is certainly quite complicated.

Life Insurance Required

Before deciding to spend money on life insurance, we need to consider and review further in addition to the reasons for “securing wealth for those who are left behind when they die” because of course this has a very high risk and is also very complex. Instead of that, personal factors and financial capabilities are much more important to consider when planning this insurance.
For example, when considering financial capabilities, we need to recalculate how much expenses our family needs per year when we no longer have income. Other things like the amount of our income, will that income be fully used to meet our own needs? The amount of premiums – which come from part of our income – also needs to be rethought whether it is enough to cover the mortgage that will be paid when death arrives.
All of these things really need to be considered carefully because in fact the premiums paid reduce the income that – at this time – is used to meet our needs. Consider the following questions to make it easier for us to weigh the decision to buy life insurance:
How long do we need to spend income? What savings and investments do you currently have? How much? What are the estimated expenses – such as funeral costs, house rent, land costs, etc. – that family when we die? If we have a spouse, does our spouse work after we die and how much income does he/she generate for family expenses? How long will he work? How many debts – such as mortgages and medical bills – do you and your family need to settle? Do we want to cover it in the form of life insurance? Do we need to provide education funds for our children in the future?

Life Insurance Fee

Come to the end that will be determined, namely the costs that will be incurred as an important factor in how to choose life insurance. Two can be cheap when we find the best according to our financial means. Most insurance companies offer a wide variety of options at a fairly affordable cost.
Unfortunately, currently around 44% of the millennial generation overestimate the price of life insurance which is high enough to raise doubts and are reluctant to use it.

Here are the factors that life insurance costs:

Age Health condition in medical records, usually to be able to take part in this insurance prospective insurance participants must pass a life insurance health exam to qualify. The amount of death benefit Insurance period: permanent life insurance has a fairly expensive price than term insurance Does the life insurance policy generate cash savings or not
In summary, the healthier and younger, we take this insurance, the costs incurred are lower and quite affordable.

Important point

Life insurance has various types of options that we need. Our financial ability, condition and age will determine the type of life insurance that is most needed. Term life insurance is only valid for an agreed period of time. We need to consider combining the life insurance for short-term needs or converting it to permanent as a strategy to save money. if you want to combine them.Reconsider selected life insurance every few years or at certain times when living conditions change (both family and yourself) including the amount of death benefits and who the beneficiaries are. Ask a financial advisor for advice about life insurance can help us choose the right type of insurance and ensure we are calm in making payments because it is adjusted to our financial capabilities.