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Insurance is one of the pillars of personal finance that is worthy of consideration by every household. It may even be vital for most families. However, despite being treated with so many types of choices and the ease of how to apply for insurance, there is still a lot of confusion, even doubts, about life insurance.
Maybe this is caused by the complexity of the concept of life insurance, an explanation from the insurance officer itself, or just an unconscious tendency to avoid any topic that comes into contact with our deaths. However, if armed with the right information, you can simplify the decision-making process and arrive at the best choice for you and your family.
Guide to choosing the right life insurance
To help you, here are 4 things you need to know before you start hunting for life insurance.
1. Understand the reason you applied for insurance
Life insurance is designed to provide families with financial security after the death of a spouse or parent. In addition, life insurance can provide peace of mind for policyholders. Life insurance protection can help pay home or property installments, tuition fees, pay for retirement, fund inheritance, and is the key to housing planning.
That is why life insurance is very important for children from families with a single source of income, but it will also be important for couples who do not work.
If you are responsible for other people financially, you need life insurance. Almost obligatory if you have a married couple or parents with children who still depend on your finances. But you may also need life insurance if you are a divorced couple, children of parents who depend on you, biological siblings of adults who depend on you, an employee, business owner, or business partner.
If you retire financially stable or financially independent, and no party will experience financial difficulties if you die, then you don't need life insurance. However, you might be able to consider applying for life insurance as a strategic financial tool.
2. Determine the amount of coverage you need
The amount of money that your family or heir will receive after your death is called a Death Benefit claim. Simply put, to determine the rough estimate of your many Death Benefit by multiplying your eight annual salaries.
Another way is to multiply your annual income by the number of years left before your retirement profits begin to be harvested.
A more detailed method is to add an estimate of the monthly family expenses you need to leave. Don't forget to include a one-time fee for managing the death process and continuing costs, such as child tuition or home loans. Take the total continuing costs and divide by 0.07. This shows that you will want to earn around 7% of your income every year to cover the ongoing costs. Add these results to the amount of money you need to cover a one-time fee, and you will get an estimate of how much crude you need for life insurance.
Remember, a rough calculation like this only gives a shadow. Using this estimate, however, will help a lot when you are required to discuss with professional insurance agents in the real world.
3. Determine the right policy
Once you know how much coverage you need, you can start thinking about the best type of insurance policy to meet your needs.
A policy is a contract between a life insurance company and the applicant (or sometimes an object, such as a trust fund) that has financial interests in the lives and welfare of others. The insurance company will collect premiums from policyholders and pay claims after your death. The difference between the premiums saved and those issued to pay claims is the profits of the company.
There are two choices of policies: term life insurance or permanent life insurance. The difference:
- Term life, aka term insurance, is the simplest and most commonly found. Soul companies design premium policies based on the probability that the Insured (you as a premium payer) will die within a certain period of time, based on health checks - generally 10, 20, or 30 years. The premium is guaranteed for the entire period of time chosen, after which the policy fee becomes too high to maintain or you leave it lost. This means that you are very likely to pay premiums for decades and not gain any benefits. The good news, means that you are still fine and defeating the "fate" of the death sentence determined by the company.
- Permanent life insurance, designed using the same calculation of the time of death as term life insurance, but also includes a savings mechanism. This mechanism, often referred to as "cash value", is designed to help the policy endure.
Besides term and permanent life, there are still many other types of policies on the market. It is recommended that you explore many options before starting to solidify your heart.
4. Wise in choosing an insurance company
You want to make sure you choose an insurance company that can support you stably, and who will invest your premium wisely to pay claims from policyholders. It's good to thoroughly research and compare all the facilities and benefits of your insurance company choice, for example Accidental Death & Dismemberment Benefit (AADB, additional insurance that will provide compensation if the Insured party experiences a deadly accident that causes death, or severe crippling injury - such as burns or loss of function of organs / limbs due to accidents).
Alternatively, you can consult a financial consultant who can help consider all your financial factors, your needs, and your family's needs.
Tips for choosing health insurance
Not only life insurance, health insurance will be just as important when we really need it. Without health insurance, you may not have access to many non-emergency medical services. In addition, in emergency situations, such as traffic accidents, without the support of health insurance, you can be trapped deep in a pile of debts - medical bills are the biggest cause of bankruptcy.
By taking into account the four points above, below are some of the things you need to know before applying for health insurance.
1. Office facility health insurance may not be enough
Health insurance facilities provided by the company where you work are compulsory. In fact, by joining together with group planning like this, the burden of expenses that you have to spend can be minimized or even completely free. This group planning insurance will also be very beneficial for those of you who have ups and downs or have certain diseases.
However, if you are required to pay for insurance and you are in good health, you should withdraw from group insurance and submit an independent application, outside the office's discretion. The reason is that group insurance bases premiums on the average health of the group members, so you can look for insurance plans that are more cost-effective or that have more benefits at the same price if your health is good.
2. Research the coverage offered
There are some doctors who are not covered by the coverage of health insurance costs. Similarly, the benefits of medical services.
This is especially true for certain drugs, alternative practices such as chiropractic, and other costs, such as labor costs and cosmetic procedures. Keep in mind that if you don't plan to have children now, you might not be able to add submissions to close the cost of labor if you later change your mind. It is recommended that you make a list of prescription medicines that you are currently using and additional "other" services to ensure that they are included in your health insurance policy.
Also pay attention to the terms and conditions, as well as limitations and exceptions, from your life insurance and health insurance to get optimal benefits for you and your family.
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