Most people would have taken up a mortgage loan when they purchased a new home. It is important to take up mortgage insurance so that your family can still continue to live in the home that you have provided for them, even when you are no longer around. The sum assured of the mortgage insurance will pay for the mortgage loan.
Life insurance is used for two broad purposes:
There are numerous life insurance policies available. Here are some basic guidelines that can help you with your decision.
A. The right policy
While there is no universally correct policy, the right policy can be described as one that will provide you with adequate financial protection and is affordable.
B. Knowing your needs
Life insurance should be bought based on meeting your insurance needs. Few people can afford to buy all the insurance they desire immediately. It is therefore necessary to decide which insurance needs are of higher priority. Here are some of the common reasons for buying life insurance.
i. To provide income continuity in the event of death or disability
ii. To provide income for the policyholder if he/she becomes critically ill.
iii. To provide savings or investments
iv. To provide for your children's education
Life insurance should be bought based on your financial needs. Few individuals can afford to buy all the insurance they desire immediately, so it is vital to decide which insurance needs are the most important. Generally, higher premiums will bring you more benefits. Thus, it is important to find the right balance between the amount paid and the amount insured for. You should buy policies which satisfactorily meet your insurance needs and which you can afford.
There may be times when you might meet with financial difficulty and consider surrendering your policy. You should, however, evaluate the various options available before surrendering.
When you surrender your policy, the amount of money you receive (known as the surrender value) may be more or less than the total premiums you have paid. This will depend on the age at which you bought the policy and the terms of the policy.
Remember that an insurance policy is a medium-to long-term investment. You are likely to lose some of your premiums if you surrender your policy after a short period, while you stand to gain attractive monetary rewards if you can continue your investment over the medium to long term.
More importantly, you must also consider the insurance coverage that you will lose at a time when it is needed most. When your financial resources are low, every income source is crucial to your family. If you surrender your policy now, your family will have to make ends meet without either your income source or any insurance proceeds should something unfortunate happen. Generally, you have 2 options.
It is important to think it over carefully before making the decision to surrender your policy. You may want to take up one of the two options above rather than LOSE your investment and financial security for your family.
If death occurs, we pay to:
A non-Muslim policy owner may nominate a natural person(s) (i.e nominee(s)) to receive policy moneys payable upon his death under his policy at any time by completion of a nomination form. Where a nominee is spouse, child or parent (where there is no spouse or child living at the time of nomination), a trust shall be created automatically.
If the policy owner is a Muslim, the nominee shall act as an executor. He shall distribute the policy moneys in accordance with Islamic Law.
If there is a living benefit claim, such as disability or critical illness, we will pay upon total and permanent disability or diagnosis of a critical illness.
The person claiming the policy money will have to notify the life insurance company and provide documentary evidence to substantiate their claim.
There are four aspects of financial planning :
An assignment means to transfer the rights of personal property to another person. A life insurance policy can be assigned as it is regarded as a form of personal property.
The assignment can be done via a Deed of Assignment signed by the assignor (policy owner) and the assignee (the party receiving the rights of the policy).
For the assignment to be effective, notice of the assignment must be given to the life insurance company.
An investment-linked policy (ILP) gives you investment returns on your savings and provides insurance coverage at the same time. There are two main types of ILPs: regular premium and single premium.
A. Regular Premium ILP
Like the traditional life policy, the regular premium ILP provides financial protection against premature death and acts as a tool of investment. However, the degree of flexibility marks the difference between them. Below is a summary of the differences.
i. Protection/ Investment Mix
iii. Investment Choice
B. Single Premium ILP
A single premium ILP is similar to a unit trust except for the additional life insurance cover provided. Should you decide to surrender the policy, the cash value is based on the prevailing value of the fund. Should you die, you will receive, for example, the sum assured or the value of units, whichever is higher. The death benefit is a salient feature of a life insurance policy and is not available to those who invest solely in unit trusts.
Life insurance is concerned with events that could happen during a person's life and the probability of such an event actually taking place. The policyholder pays premiums regularly and this ensures payment of an agreed amount if the specified event - such as death or an accident resulting in death or disability - occurs. Premiums collected from all the policyholders are pooled together to form the life insurance fund. This fund is nurtured with the intention of being paid out as and when required to the dependents of those who have contributed to it. Life insurance normally combines protection with a regular savings programme.
While life insurance cannot prevent any of these events from happening, it can provide for protection against financial loss as a result of these events.
Life insurance policies can be divided into those with profits and those that are non-participating. Plans with profit allow the policyholders to share in the profits made by the life insurer. A non-participating plan does not and is therefore relatively cheaper. Most life insurance plans are participating, with the exception of term plans and supplementary benefits or riders. The main types of life insurance plans are:
i. Whole Life
iv. Supplementary Benefits or Riders