I frequently heard questions about which life insurance package should I choose, and I’d admit it is was my first throught when I had to start my first job.

First and foremost: What Is An Life insurance Package?

Life insurance or life assurance is a contract between the policy owner and the insurer, where latter accepts to pay an amount of money to insured individual’s in case of events, such as death, or on certain other conditions such as terminal illness, or critical illness.

Of course, people with thousand of money could don’t have need it. Usually, it’s used by those people that has need it on emergency. Life insurance was developed to provide temporary life insurance protection on a limited budget. Generally is choosed by people that start their first job after university like me.

Now the question is: How many life insurance packages exist in the market? The answer is: a lot.

They are subdivide into investment, saving linked and just life insurance. Some cover personl accident, while other including 36 critical illnesses coverage.

There are a lot of term life insurance or term assurance that provides coverage at a fixed rate of payments for a limited period of time. And most of them are cheap. I want to make an little example with the Public Mutual Berhad, the largest private unit trust company in Malaysia.

The Mutual Life Plus 2 is an insurance package especially designed for unitholders of Public Mutual. It’ Is a term insurance policy which protect you against;

• A. Group Term Life (GTL)
• B. Group Personal Accident (GPA)
• C. 36 Critical Illnesses

The benefit coverage are:

• Age 19-60: Death + TPD + Critical Illness
• Age 61-65: Death + Critical Illness
• Age 66-70: Death only all causes.

The Mutual Life Plus 2 package only cost RM720($215.71) in the first year. Then, The cost come to RM950($284.62) the next 5 years. They also covers RM200,000($59919.39) for natural death/TPD, RM400,000($119838.79) for accidental death/TPD, RM200,000($59919.39) for 36 critical illnesses accelerated.

Why We Need An Insurance Package?

The first reason, is because can help us against unexpected problems. For instance, when you work while you travel. Often, the package suggested by insurance agent is around RM1800 per year. It includes medical, life, and investment. However, the coverage is low.

If monthly expenses is RM1,000($299.60) only, then with RM50,000($14979.85), you will finish it in 4 years.

On the other hand with RM400,000($119838.79), you will not finish using it until you die. Why? If you Keep RM400,000 in fixed deposit with 5% interest rate, you will get RM20,000($5991.94) per year.

In general, for a single, RM200,000($59919.39) coverage is enough while if you have a family you need to increase it to RM400,000($119838.79) or RM500,000($149798.48).

Make a life insurance to protecting your family from financial disasters is a core part of your planning process. It help you to fix the  financial burden your family will face if something  happens to you. This article is a little guide on life insurance, which help you to learn some concept and give you an idea of how life insurance works.

What Is Life Insurance?

In general, people have a basic knowledge of insurance. In brief, life insurance is an agreement between owner and insurer where the owner receive a amount when an insured event occurs.

Image Credit:kirkbride palace

Life insurance examples are pretty straightforward. Consider your home. If your house were to catch on fire, your insurance policy pays a prearranged amount based to the terms outlined in your insurance policy.

Also, when the insured person dies, the company provides compensation to the designated beneficiary. The following persons are generally involved in a life insurance policy:

• Who is the insured – The person which an insurance policy is issued.
• Who is the beneficiary – Anyone that receives the payment.
• Who is the owner – Anyone is responsible for payment of premiums, can be the insured but could be the beneficiary.
• Who is the insurer – It’s a company who help anyone have losses and damages in consideration for a premium paid.

Why People Make A Life Insurance?

The main reason people purchase a life insurance is to protect their family against the risk one of them dies. There is a lot of cost involved when you pass away and it is important that you have enough money to cover these costs.

Consider this, what happens if you die while you have a family, a house payment, send your children college, how does your Family survive? Here come into play the life insurance in order to protect your family against financial uncertainty.

Choosing a good life insurance plan is important for you so that your family are covered at the time of your death. In base your financial needs you can choose between different types of insurance products:

1. Term life insurance - This type of option provides coverage for fixed periods of time. At the end of that period, the insured can choose to drop the policy or continue the coverage by paying annually.

2. Whole life policies – Unlike term life there no limit of time, and give you with coverage until your death.

3. Variable universal life - Is a type of permanent life insurance, because the benefit will be paid if the insured dies any time as long as there is sufficient cash value to pay the costs of insurance in the policy.