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You might ask your insurer that why only after three years your life insurance get expired. The answer lies in the commissions paid to agents and overriding commissions to supervisors and managers of insurance companies. These, according to an official source, can be as high as over 240 per cent of the premiums, the average being 200 per cent.
Third on the list of insurance policies is called term insurance. This covers you for a specified period and is generally terminated at the age of 60. It does not provide you with any benefit. You cannot cash it, after three years or claim the amount at say the age of 60. It is, put simply, a death policy. Only your beneficiaries would be given the assured amount. For this reason the premiums of term insurance policies are lower than both the endowment and the whole life cover.
Two other types of life insurance polices are available to you. One is called the investment linked life insurance, and the other group term policy. The former accords you life insurance if you invest in unit trusts, the latter taken up by corporations, banks intent on luring fixed deposits and unit trusts which adopt this strategy to attract investors.
The investment linked policy works this way. You invest in unit trusts and you take a life insurance policy. You thus take two risks – your investment and your premium. But the returns are greater to your beneficiaries and to you when the policy matures. For they would get assured sums of your investment, that is your initial investment and assured returns, if you were to die before the maturity of the policy. But this policy is specifically prohibited by the Insurance Act unless approved by Bank Negara.
Finally we have the group term life policies. Initially these policies were by companies to ensure they would get returns if their trained and employees died. Gradually this type of policy evolved into a benefit for the workers. It provides benefits to the families of the dead employee, at the workplace or anywhere else while he is still in the employ of the company.
A feature of this group policy is that the premium is low, between RM2 to RM3 per RM 1, 000 assured. This explains why it has become increasingly popular. Two years ago 6,401 policies had been taken out, covering 1.71 million people. The assured sum was RM26.86 billion. Even banks and promoters of unit trusts have jumped onto the bandwagon of the group term life policies. If you place a fixed deposit beyond a certain amount for a specified period the bank would give you life cover free of charge. Which means your beneficiaries would not only get the amount you have deposited but also the assured interest rates for the period you have deposited the amount. So also unit trusts.
It must be noted that these life policies explained above are not the only covers you can obtain. Banks and insurance companies offer others like Education savings plans with a built-insurance protection.
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