Which is better, buy your own home or contract? For some people, owning a home is a necessity, even an ideal. But there may be people who argue, contracting is more profitable. The answer is very subjective, depending on the consideration and condition of each individual.
A similar situation will be encountered when planning life insurance. Which is better and more profitable, buying whole life insurance or term insurance and investing the remainder of the premium (buy term and invest the rest). The answer is also very subjective.
As the name implies, whole life insurance (WLI) provides death benefits to old age. The sum insured will be given when the insured dies or at the end of the contract period. Premiums can be paid for a lifetime or for a certain amount of time. In its development, there are also types of endowment and unit linked life insurance, which provide savings and investment benefits, with a variety of withdrawals during the insurance period.
Term insurance (TI) is insurance that provides life protection for a certain period or until a certain age. The benefits provided are only death benefits, no life benefits. The duration of the insurance coverage and also the age limit for insurance coverage is shorter than WLI. IT premiums are cheaper than WLI, because in addition to the lower level of risk borne, WLI premiums have included the element of savings.
The selection of insurance types is subjective
It's not wise to say IT is better because it's cheaper, or WLI is better because it provides life benefits. Comparison must be done by Apple to Apple and adjusted to the goals and conditions of the prospective insured.
There are at least two things to consider:
- Insurance goals
The goal will determine the insurance time horizon. IT is suitable for short-term goals, for example, project worker insurance and credit insurance. IT is also suitable for people who have not been financially established or do not want to pay premiums that have an element of savings. Another advantage, IT can optimize the sum assured. While WLI is suitable for long-term goals, such as providing inheritance funds as well as old-age savings funds.
- Knowledge and Discipline of Investing
For people who are disciplined to save and have the knowledge and access to various investment opportunities, take IT and invest themselves the remaining premiums may be more profitable. But for people who lack discipline in saving, and are limited in their knowledge and access, life insurance programs that have an investment element will be more useful for preparing mid-long term savings.
WLI and IT cannot be compared directly, because both are indeed designed for different needs. Insurance planning is subjective, so it must be tailored to the needs of each individual.
No comments:
Post a Comment