27 August 2020

By Pax Naguiat

Getting a life insurance/takaful plan can help provide financial protection for you and your family such as income replacement, paying debts, or provide savings cushion in event something unfortunate happens to you. Likewise, changes in your life can affect the type of plan that you should get. So, how exactly do you get started on selecting one?

Below are some pointers to help you understand life insurance/takaful plans better.

Reasons to get a life insurance/takaful plan

1. Protects your income and provides peace of mind
It is important, especially if you are the breadwinner. If something were to happen to you, this will serve as a means to provide income to your loved ones and put you at ease knowing they are financially protected as long as you put them as beneficiaries.

2. Protects your money
Since we all have the intention to grow our money, naturally we would want to ensure that the money we worked for should be protected from losing its value as well.

3. Covers health needs
Spending on your health, once it deteriorates, can drain the wealth you have worked hard for. Having the suitable life insurance/takaful plan and with the right riders, can provide the relevant health and medical coverage.

Ways to spend less on premiums/contributions

1. Get it while you’re young
Age is one of the factors in determining the amount you need to pay as it gets more expensive the older you are.

2. Change your lifestyle
Your health condition and lifestyle will also determine the amount. For example, smokers pay higher premiums/contributions because smoking makes them more prone to health risks than non-smokers.

3. Start early before commitments increase
As you get older, responsibilities and spending tend to increase. So, it makes sense to get a plan when you are young when expenses are likely to be less heavy. The important thing is not to postpone.

The versatility of life insurance/takaful plan

1. Think of it as saving, not as spending
Instead of seeing the act of paying for the plan as an expense, why not interpret it as saving for a future fund? After all, some plans come with cash value that builds up over time and which you can also tap into at any time.

2. It makes your money inflation-proof
The value of money today will not be the same in the subsequent years. That term is referred to as inflation. The beauty of life insurance/takaful plans is where the value of benefits increases to keep up with inflation.

3. Pay off debts
Your plan can be used to pay off the debts that you leave behind instead of becoming a financial burden to your family.

4. Provide for your loved ones or even yourself
Your plan can provide for your family’s essential needs such as food and tuition even if something happens to you. It can also be used to supplement your retirement needs. Check out some of our retirement plans here.

5. Protect your business
A life insurance/takaful plan can cover financial obligations in your business so that your hard work doesn’t go to waste in case things go awry. If the nature of business is of partnership, then both parties should have coverage. That way, if one of you passes away, the other isn’t left with a heavy financial burden.

6. Cover your “final expenses”
Let’s face it, funerals can be pricey. A life insurance/takaful plan can provide for your final expenses so that the people you leave behind will not have to worry about money at an already stressful moment.

Factors to consider

1. Think of the amount you can comfortably shell out
Consider your income when it comes to purchasing a plan. There is no point getting an exorbitant coverage if your payment ability is not sustainable in the long run.

2. Opt for a comprehensive coverage
You can protect yourself against a range of risks with a comprehensive plan that provides hospitalisation and disability benefits, when you pair it with the right rider.

3. Ask about payment structure options
There are 2 types of payment structure - one that remains the same until you reach the end of your term while the other one will increase as you grow older. Choosing a suitable premium/contribution structure will depend on your financial situation.

4. Know that premiums/contributions are variable
It’s not a fixed template for everyone. Older people, smokers, and those who have a high-risk job pay a higher amount. There are also several other factors that determine the cost of life insurance/takaful plan but a general rule is you will pay less the younger and healthier you are.

The selection process

1. Choose a reputable provider
A good place to start from is to choose a provider that has established itself to be secure and reputable. This will give you the peace of mind that the money you worked hard for is being managed well.

2. Consult with a financial advisor
A good financial advisor will take into consideration your financial situation, including your income capacity, appetite for risk, your financial assets and obligations, your stage of life as well as financial goals, among others before recommending a suitable plan.

3. Assess future possibilities with your partner
If you have a partner, take the time to talk about how each of you would financially cope with paying premiums/contributions and other financial responsibilities if the other passed away. By discussing this together with your advisor, you will have an idea about how much coverage you need.

4. Don’t be discouraged by the application process
It is part of the process to be asked to disclose your salary, smoking habits, and medical history. This information is needed to assess the risk you pose, which will determine your premiums/contributions. It is important to be honest about the details because inaccuracy on any of the relevant details can risk your policy to be void.

5. Feel free to compare
It’s always a good idea to compare different products to know what is best for you. Just make sure to ask an advisor all the questions you have in order to understand thoroughly.

Things to do once you have coverage

1. Review your plan on a regular basis
Your needs will change as you go through different life stages. The plan you took when you were a fresh graduate is likely not enough after 10 years when you have a family depending on you. By reviewing your insurance/takaful plan with your financial advisor, you can check if you need to add on another coverage to fit your current situation.

Life insurance/takaful plan is an important part of self-care that can mitigate financial trouble in the future. This may not be the top purchase that immediately gratifies you but it’s one of the choices your future self will thank you for.

Look out for useful facts and tips from us to protect yourself for a brighter future. Talk to our advisor now to know more!