Tuesday, August 02, 2005

Life insurance - Basic (2)

A simple and basic life insurance will do the job of insuring our possible expenses and possible loss of income perfectly well.

What about Investment Linked Life Insurance? This is financial package that includes investment. There are two parts in this financial package, one is insurance and the other one is investment in unit trust. The investment part addresses one investment needs. We must not mix it up with insurance needs.

What about Whole Life Insurance 's cash value? This, too, is a financial package that includes savings. There are two part in this financial package, one is insurance and the other one is savings in cash. It addresses your saving needs beside your insurance needs. However we really can handle saving ourselves and we must not mix up our savings needs and insurance protection needs.

I am particularly critical of the life insurance products that come with saving and investment elements like Investment Linked or those Whole Life with cash value. By mixing insurance and investment/saving, we confuse ourselves. We tend to think insurance is expensive while, in fact, more than half of the "expensive" premium we pay goes to investment/saving instead of insurance. Insurance is actually affordable, but with investment/saving elements it gives the wrong impression of being expensive.

Precisely because of this, it deprives us from buying sufficient insurance coverage! If we stop paying for the investment/saving element of our life insurance, we could probably afford to triple our insurance coverage/ financial protection.

Do you realize that? Did your agents tell you that?

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