Life Insurance - Product Definition
With so many types of Life Insurance plans to choose from, it is important that customers understand what these plans are and how they can help protect themselves and their family members. Here are the type of Life Insurance plans that customers can choose from.
Whole Life Insurance
Whole Life Insurance provides long term protection where a sum will be payable upon the Death or Total and Permanent Disability (TPD) of the policy holder. Whole Life Insurance is offered in two forms.
- Participating plan: With this plan, policy holders will get to share the profits of the insurance company through their participating fund. The profits made will be paid out in the form of non-guaranteed cash bonuses and dividends.
- Non-participating plan: Unlike the participating plan, the policy holder of a non-participating plan will not share the profits of the insurance company.
Unlike Whole Life Insurance, Term Insurance policy holders will only get protection from the insurance company for a fixed period of time ranging from 5 years to 30 years depending on the need of the customer. Savings and investments will not be included in this plan so no cash value is payable if the policy is terminated prematurely.
Upon Death or Total and Permanent Disability (TPD) of the insured person during and at the end of the policy term, the policy will pay out the sum assured or offer a refund of the premiums paid depending on what was offered.
This plan serves as an excellent option for businesses as it is able to insure key partners/stakeholders in the company and it is cheaper than a Whole Life and Endowment insurance plan.
Policy holders will be offered protection for a fixed period of time where a lump sum is payable at the end of the policy term or upon Death or Total and Permanent Disability (TPD) of the insured person during the policy term. There are also policies that will pay out a guaranteed cash benefit yearly during the policy term as long as the insured person lives until the end of the policy term.
This plan is often purchased as a safety net for retirement savings and children’s education. The cash benefit given to the policy holder might be less than what is offered in a Fixed Deposit because it offers insurance protection at the same time. It may also be subjected to investment risk as well.
An Investment linked plan is both an investment and a protection. The policy holder can decide on the protection and investment levels based on their needs and goals. It is this flexibility that has made the Investment linked plan one of the more popular choices.
Life Annuity Plan
Policy holders will be given fixed payments at regular intervals for a fixed period of time or as long as the policy holder lives. This plan is usually purchased to provide supplement income during the retirement years. Most of the plans require premium payment in a lump sum but there are also some that offer regular premium payment for a specific duration as well.
Rider/ Supplementary Cover
Policy holders can choose to attach this Rider / Supplementary Cover to their basic insurance plan such as Term, Endowment, Whole Life or Investment Linked plans to obtain additional protection. These will result in additional premiums or insurance charges.
Mortgage Reducing Term Assurance (MRTA)
This plan will cover the repayment of an outstanding property loan to the financial institution in the event of untimely Death or Total and Permanent Disability (TPD) of the borrower / insured person.