How much Insurance Should You Have and What Type of Insurance Should You Buy?
Based on our years of experience as the front runner of Asia’s insurance industry, we believe that there are two key questions you should address as it relates to your family's life insurance plan.
The first question, how much? There is no set amount because everyone’s financial situation is different. To determine this amount, you will need to take into consideration any mortgages you may have, debt and future costs such as children's education, weddings and ongoing expenses that may include how much is needed for your family to live comfortably and for how long.
Once you have an idea of how much, then you will need to decide what type. In all honesty, it really makes a huge difference.
Home Purchase vs Rental
We would like to explain this using the home purchase versus rental analogy. When you decide to purchase a home, it's often a permanent decision. It is more expensive monthly, if you think about mortgage payments, taxes and maintenance. You build equity as you pay down your mortgage responsibility and eventually, once you pay it off, you have more control over options like improvements and renovations, payments will eventually stop, and there are numerous tax benefits that comes with owning a home. Renting would be the complete opposite in most of these areas.
So that is how you should look at permanent or cash value life insurance versus term or temporary insurance. Both options provide you with a place to live but one may or may not be a better decision than the other.
Financial Goals and Budget
It is all dependent on your personal financial objectives and budget. If you are leaning towards the permanent option, we strongly recommend that you must understand and be comfortable paying the larger premiums over time, understanding your short-term and long-term prosperity goals, and be committed for the long term.
A long-term product serves many purposes and offers life coverage along with a lot of options that will add extra protection against things you probably have not thought that you will ever need protection from. One such noticeable difference is that life insurance contains protection and savings (cash value) whereas term insurance only provides protection.
Pro Tip: A simple and lower cost method to start down the permanent path is to go the rent-to-own path where you get a larger term policy for over 20 years and convert smaller portions regularly from term to permanent insurance.
Income Replacement Coverage
As we have discussed the benefits of a Life Insurance Policy, we now know that it comes with a number of coverage options.
If you are interested in getting Income Replacement Coverage, these are generally categorized under health insurance but is commonly overlooked under disabilities coverage as Life insurance usually covers total permanent disability and critical illness. For income replacement coverage, we currently have two plans - Pay Assure and Life Secure. These policies provide monthly benefits to supplement as an income replacement in the event you are unable to work due to medical condition or injury.
Speak with us to find out how you can protect your life against the odds.