Life Insurance Made Simple
What is life insurance? Should I have life insurance? Isn’t life insurance just for old people?
Definition of Life Insurance
Life insurance is a form of financial protection. Adequate monetary support will be provided to the insured’s family to cover the insured’s family’s daily expenses and ensure minimal disruption to their lifestyle.
Life insurance is a type of protection. It is meant to protect your nearest kin in the unfortunate event that your life in its current form is taken, either because of death or due to a permanent disability. The protection takes the form of money, which your nearest kin receive upon your death. This amount of money is known as the “sum assured”. The circumstance which triggers or results in payout of the sum assured and the sum in itself are two of the major components of life insurance.
Let’s summarise what we have learned so far. Life Insurance consists of two major components: size of payout and triggering event. The difference between the seemingly millions of insurance policies out there lies solely in these two components. The price tag on the different life insurance policies is directly related to these two components as well. If we think of it in that way, it’s not so painful to grasp!
Breaking it down into categories
There are a few basic categories of Life Insurance. Let’s summarise them in the simplest of terms.
1. Term Life: Insurance is provided for a fixed period of time. The insurance company pays the sum assured in the event of death. The event could also be total and permanent disability (“TPD”) if the insurance policy specifies this as a triggering event. If it is not specified, death is the triggering event.
2. Whole Life: As the name probably relays, this policy is life-long. The sum assured will be paid out to loved ones (“dependents”) upon death.
3. Endowment Insurance: This policy is like the Term Life insurance, but with an extra serving of sprinkles on top! In reality, the sprinkle is a special type of savings. There are a few variants, but the main idea is that a part of the payment you make each month or year to the insurance company is invested. The return on the investment acts as a savings account for you. Usually, these types of policies have a strict time interval, meaning that you cannot cash out your savings before a decided-upon date.
By varying the type of life insurance plan, the payout amount, and the triggering events, a kaleidoscope of policies can be formed. Diving in to choose the one that is right for you can, of course, be quite arduous.
Why is life insurance important?
Now you may wonder, if it’s such a bickering process finding the right life insurance, why should you even give it a second thought? The answer depends on which stage of life you are at and what sort of lifestyle you are living.
For a young family of moderate income, life insurance should be a given. If either parent were to pass away or become permanently disabled, the ramifications on the remaining family members are both emotionally and financially negative. For the sake of your family, it is vital that you have proper life insurance coverage.
For a young person without life insurance, the pros of having life insurance are that the payout can cover funeral costs, potential debts, and possibly help a chosen loved one (called a beneficiary in insurance policies). Not having kids does not automatically mean that there’s no one to care for in your life. The same goes, of course, for an adult without children! There are policies called “First-to-die” for couples. These policies are priced almost the same as a single-person policy, and the sum assured is applied to the individual who first passes away.
In addition, one reason for purchasing life insurance at a young age is that the premium (the name for the cost per month or cost per year) is generally lower for a young and healthy individual. Purchasing later in life may result in a much higher premium for the same coverage. Especially if your health deteriorates due to, for example, a chronic illness.
Life insurance can also be seen as an investment opportunity or a way to safeguard mortgages or other debts. A life insurance policy can even be given as a present to a child, in a similar way to how funds may be given. However, the most important aspect is that your loved ones are taken care of in the case that a fateful event was to take or drastically change your life. Let me once again summarise what we have learned: life insurance is important! Purchasing and understanding a basic life insurance is within every person’s capability, so go buy now!
Which life insurance is best for me?
How can I acquire life insurance (without all the hassle)?
Begin by checking out the life insurance products available on PolicyPal! You will be able to select a policy which fits your lifestyle, needs and budget.
Of course, it is possible to contact insurance companies directly as well, and then make comparisons amongst them. The disadvantage of that is that it will be more difficult to get a bird’s eye view of available plans.
To decrease the hassle even further, you can upload your life insurance policy and other insurance policies onto the PolicyPal app. The app uses OCR technology to collate all the important information, such as the premium amount and coverage amounts. For all of your policies, the important information is organised and premiums are summarised. You’ll be able to view all of your policies on the go and in one app! It’s the ultimate bird’s eye view, allowing you to see all of your insurance policies in one place.