Is Family Life Insurance Worth It?

Life is unpredictable, and you don't want to leave your family struggling to deal with the financial consequences of an unforeseen tragedy. Therefore, a family life insurance policy is a wise strategy to safeguard your loved ones in the case of any eventuality.

And if you're wondering whether a family life insurance policy is worth it, read on. Our write up will assist you in understanding the various aspects of this insurance based on your needs, goals, and financial situation.

What is family life insurance and what does it offer?

As the name suggests, "family life insurance" covers each family member. It typically offers complete coverage for the family's primary earner and term life insurance coverage for their spouse and dependents.

Family life insurance coverage is flexible and can be easily customised to meet your family’s unique requirements. For example, policies typically offer varying benefit levels for different family members to provide enough coverage, depending on which family member passes away.

However, the goal of this plan, irrespective of how you structure the policy, is to ensure that every family member has adequate coverage to support their requirements throughout their lifetimes.

The insurance payout can be utilised by your folks for funeral costs, to repay any mortgage and other accumulated loans, or to cover daily expenditures.

Types of family life insurance plans

Several family life insurance plans are available, and choosing the right one can be rather confusing.

Here are some factors to help determine the type of insurance plan appropriate for you:

1. Number of family members.

2. Number of family members under the age of 18.

3. Likelihood that one or more family members will contract life-threatening illnesses.

4. Your intended savings and investment strategies.

5. The coverage reimbursement you would want to see provided to your family.

Let's look at some of the plans available for you to choose from :

1. Joint policies for spouses
This policy is designed for couples to get a life insurance policy bundled under one plan to ensure financial security in the untimely demise of either spouse.

Typically, a joint life insurance policy is considered permanent life insurance, which offers a death benefit up to the time of demise.

However, joint life insurance policies can be customised to match your requirements and objectives, just like other forms of family life insurance. Many people include certain clauses in their combined life insurance policy.

For instance, say your spouse is suddenly diagnosed with a terminal condition, such as advanced heart disease or cancer. You can collect the death benefit early if you have a clause permitting an expedited death benefit. Thus, the money can be used for long-term care, medical bills, or other costs associated with having a terminally sick spouse.

Therefore, purchasing a joint insurance policy might be smart for households without kids, as it will help the surviving spouse cope better with the situation.    

2. Family life insurance for children
Nobody likes to even consider the loss of a child, but life insurance for kids has several advantages. In addition to helping with some financial costs in the event of the unimaginable, life insurance for children ensures coverage as they age.

If your child develops health issues later in life that would prohibit them from being eligible for life insurance on their own, convertible insurance plans can ensure they are protected. Children's policies can be combined in a family life insurance plan, even if you can buy them independently.

3. Life insurance for parents
Protection for parents is a separate feature of these insurance plans. The plan might include something as basic as last expense insurance with a death benefit that is minimal but sufficient to pay for funeral costs and other final bills.

If your parents don't have insurance policies, you should consider adding them to your family's life insurance plan.

Need a plan for more members in your family? Consider “Extended family coverage plans” to get your loved ones covered!

Benefits of family life insurance

Family life insurance protects your family's financial future. If one or more family members pass away, the payout may be utilised by the survivors to:

1. Cover funeral costs

2. Substitute lost income

3. Pay rent or mortgage

4. Clear off existing debts

5. Pay automobile loans

6. Make payments for credit cards

7. Cover healthcare costs

8. Pay tuition and fees for children's education

9. To maintain their standard of living

10. Provide funds for relocation (if any)

Who should get family life insurance?

Family life insurance should be a top priority if you have dependents who completely rely on you financially. This applies to parents employed or staying at home, as in the event of your demise, your family may have to substitute your income or your position within the household.

Do all my family members need a life insurance policy?
It’s always recommended for each person to have insurance cover no matter their age. However, some families do not have the budget to cover each person in the household. In such cases, families can look into a family life insurance policy or, at a minimum, cover the breadwinner and adults in the household to help secure a financial future.

Can you buy life insurance for a family member in secret?
It is impossible to buy life insurance for a family member in secret. There are several reasons why you cannot do so.

1. The insurance company requires a medical report for the person insured.

2. The insured individual must sign a statement acknowledging that they have read the policy's terms and conditions and agree to them.

What additional plans should I take with family life insurance?

To ensure financially security at all times, it is a good idea to obtain insurance policies for your health, children's education, business insurance (if applicable),

and wealth insurance, in addition to family life insurance. You can also protect yourself financially against critical illnesses such as cancer or heart disease.

How much does family life insurance cost?

The cost of insurance is determined by several variables, including age, gender, lifestyle, the quantity of coverage needed, and the benefit offered by the policy. Some people advise that the insurance premium for life insurance not be more than 6% of the person's salary. Others say you should be insured for ten times more than your annual income. Thus, it’s best to chat with an experienced insurance agent who can provide sound advice based on your needs.

How to buy family life insurance?

Here are some steps to take to determine the policy that is best suited for you and your family:

1. Have a financial plan
Make a strategic financial plan after taking into consideration :

• Your annual income, including salary and bonuses.

• Debts, such as business loans with personal guarantees, mortgages, auto loans, and other liabilities that your family would bear after your demise.

• The number of years you have left in the workforce until you retire.

• Whether you wish to leave your heirs an inheritance.

• Your funeral and final costs such as hospital charges, etc.

• Whether you want your insurance coverage to pay for things like family weddings and other significant life events after you pass away.
  
  

2. Calculate how much insurance you need
Ideally, life insurance should replace most of your income during your working years. Alternatively, you can adhere to the general guideline of getting a life insurance cover at least ten times your annual salary (RM1 million in life insurance if you earn RM100,000 per year).

3. Compare insurance quotes
Whether you just need affordable family life coverage for your earning years or you're a high-net-worth person intending to leave your family a tax-free inheritance, there's a policy available for every financial situation.

The key to purchasing a suitable policy is research. Take time to compare quotes from various companies. Check their websites and talk to an insurance agent or family wealth planner before buying a policy.

4. Choose to go with a reputed company
Be cautious to only purchase from reputable firms and agents. Unauthorized insurance activities are unlawful, and their policyholders are not covered if they go bankrupt.

Family life insurance company in Malaysia

Find a trustworthy insurance company with a high claim settlement ratio when looking for an insurance provider. It's also a good to study customer reviews to see how quick and easy your life insurer's claim process is.

If you need reputable insurance company in Malaysia, Prudential has been in the market for decades. They are reputed to be a reliable and affordable insurance company in Asia.

With experience on their side, Prudential's expert financial advisors can help analyse your needs and match you with the most suitable insurance policy.

Conclusion

Family life insurance is an important financial tool essential for a secure financial future. It is a significant advantage that may be well worth the additional cost to ensure your family is financially secure after you're gone.

Check out Prudential’s plans on family life insurance and other rider policies to protect your loved ones.