Having a life insurance can help you anticipate the financial risks that can arise from the death of the breadwinner and because of other calamities that make the family income tap undisturbed. However, to buy life insurance also needs its own accuracy so as not to get trapped in the purchase of inappropriate products. Often a person buys life insurance, it does not fit the needs so that when disbursed, financial risks are avoided still occur and shake the family's financial health.
For example the value of insurance money is very small, not as expected. Or most of the premiums or fees paid per month turn out to be big enough for some reason from the insurance company. If you are planning to buy life insurance, consider the following four major research mistakes to avoid buying one:
1. Not knowing the need for money coverage Many people simply buy life insurance without first calculating how much money needs actual coverage he needs.
As a result, when there is a risk, the sum assured is not sufficient to cover the financial needs of the family. Know in advance how much money your life insurance needs so you can find the right product. How to know the needs of life insurance money you can calculate with the approach of Human Life Value, with the formula of the multiplication between the current income value plus risk free rate.
For example, your current income is Rp 10 million per month and your dependents can be independent for another 20 years. Assume a risk free rate of 5.2 percent. Therefore, the life insurance coverage is Rp 10 million x 12 months x (110 percent + 5.2 percent) x 20 years = Rp 1.42 billion.
After knowing the money needs of insurance, you just look for life insurance products with the value of Sum Insured (UP) for it. You can weigh the term life product or pure term life insurance which the price of the premium is still reasonable with the value of the UP is large enough.
2.Purpose insurance as an investment About insurance, one thing you need to keep in mind is that insurance is a cost. Insurance is not an investment where you can expect big returns someday.
Conversely, insurance is a cost because in principle insurance is a scheme of transfer of risk to a third party of insurance companies. The insurance company will pay a certain amount of compensation or sum insured when there is a risk to the insured or the policyholder.
The policyholder is required to pay the premium as the cost of transferring the risk to the insurance company. Life insurance can not prevent death. However, life insurance can alleviate the financial burden of family members left behind when the breadwinner dies.
One consider insurance as an investment product can lead you to choose life insurance products that are less precise. Like buying life insurance combined with investment. As a result the premium is quite expensive, while the sum assured is relatively small. So be smart in choosing the best.
3. Set the insured in the policy In insurance, the insured is he who is assumed the risk of his soul by the insurance company.
Thus, when the insured dies, then the insurance company will pay a sum of money that is entitled to be given to the appointed heirs. Who ideally becomes the insured in life insurance products? In accordance with the purpose of purchasing the financial risk management of the family, the insured life insurance should be those who have economic value or the party that became the source of family income.
For example, husband, wife, or both. If husband and wife work together, the insured should be the party with the greatest income because the financial risk is also greatest for the family if he suddenly dies.
4.do not know buying supportive insurance Usually when you buy life insurance, insurance agents will offer also complementary insurance or rider. Do not just add extra insurance before calculating first what your needs.
Additional insurance also means additional costs, then it is wise in adding the types of riders. If necessary, for life insurance you can consider adding it with a waiver of premium or premium waiver.
These riders are useful to anticipate the risk of incompetence which results in you being unable to pay regular premiums. For example because of an accident that makes you lose your job, you will be exempt from life insurance premium payment.
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