Monday 21 July 2014

Life Insurance: Dead or Alive

Death is part of life’s process that is definite and has nothing to do with choice! Most people often say “God forbid” as nobody wants to die. It’s a debt that all must pay but when is what no one can determine. The fear of death becomes overwhelming when there are several unfinished tasks that we keep procrastinating about and putting off for a later day. One of such is task is providing for our families and leaving a legacy when it eventually occur. Remember, death does not give notices and it’s usually sudden without time ctrl Z.


Insurance is a product/service you buy when you don’t need it but becomes too late when the need arises. Life insurance therefore is a policy taken by the insured on his life against his death and sum insured payable to the beneficiary. Overtime, Life Insurance has evolved and serves both the living and the dead. The beauty of Life Insurance is that the insured can reap the benefit of the policy dead or alive depending on the type of policy and duration.  The benefit goes to the beneficiary upon the death of the insured and to the insured upon maturity of the policy, whichever comes first.

Three (3) Life Policy types will be reviewed and the elements/modus operandi will be highlighted:

1.  Group Life: usually taken by a group of people working in the same organization (a company with up to 4/5 staff is required by law to take this policy on behalf of their staff) or a society/association. The policy can be extended to cover burial expenses and carriage of the corpse to the point of burial (seek advice/information for the extensions). Key elements include:

·         Premium is usually calculated based on the age of the insured or the average age of the people involved if the number is large and not all becomes cumbersome to confirm the ages.
·      For the employees, it provides cover for 3 times the annual income and only covers during active service; usually from home to the office, while in the office and office back home (not office to club, etc).
·        Renewable every year and the risky nature of the job is also considered in calculating the premium payable. Premium for a security/policeman will be higher than an office clerk.
·            Employees above 65 years of age are however excluded (probability of occurrence).
·       Policy can be extended to include permanent disability and medical expenses (Group Personal Accident) resulting from an accident, etc. that may arise during active service.
·           Benefit can only be collected upon the death of the Insured

2.      Investment Plan: Saving for the rainy day. This entails the gradual setting aside of funds on a regular basis (monthly, quarterly, half-yearly or annually) for a given period. In the event of the death of the insured, sum insured (sum of the total contribution for the tenor I.e. 2, 5, 10, etc.), if the insured survived the period of the insurance, plus accrued interest is returned to the insured and the cycle can be started over. The ROI is usually better than the money market rate. Key features include:

·              Setting aside of a fixed sum over a period of time
·       Amount contributed cannot be collected until it reaches its surrender value e.g. 3-4  years for a 5 year policy. This is to encourage saving culture and discipline while    discouraging frivolous withdrawals
·    Some policies do allow part withdrawal of the amount contributed thus far. The  percentage to collect however differs and it is determined by the Underwriters.
·           Can be used to save for special events likes school fees, wedding, retirement, building  projects, starting a business, etc. Some policy also allows the management of such  funds for the payment of school fees as they fall to avoid wastage by the guardian of  the child.

3.      Annuity: Operates like the pension plan and useful in planning for retirement from service and old age when the physical strength fails. Provides for regular income for the insured (monthly, quarterly, etc as agreed from inception). Payment may however stop upon the death of the insured, depending on the structure of the policy. Key features include:

·     Bulk sum is placed with the insurance company/underwriter for a specified period of time for payment at installment.
·          Age of the insured at the inception determines rates to be applied and amount to be paid at intervals
·           With the e-payment, account of the insured is credited at the stipulated time till death.

Nobody prays to die but it comes unexpectedly and those at the receiving end are usually our loved ones (children). Promises from other family members are never kept as they also have a basket of issues that needs their attention. There is a popular saying that “it’s better to be prepared than be sorry”. If death should knock your door today, is the feature of your loved ones guaranteed? Do you have any project in the pipeline that you want to save towards? Do you want to continue earning salary during retirement?

The great part of these life policies is that sum insured will only be paid to the beneficiary and cannot be cornered by family members, creditors, etc. There are cases where deceased immediate families are thrown out and properties/assets cornered by the extended families, creditors, etc. even before the corpse is laid to rest. Don’t you think your loved ones deserve better? It’s time to make that move and put that your resources to a better use for the sake of your family!


Your input, comments and enquiries are welcomed

No comments: