sourcethical.in – After getting to know term life, there is also a second type called whole life.
This insurance contains savings value. The protection period is also longer, up to 99 years. This insurance is referred to as a refinement of term life insurance that has no cash value. You will remember that if there is no risk of death, at the end of the term insurance contract, the customer does not get anything?
Now, to satisfy customers who complain about term insurance, on whole life insurance , when the contract ends and the insured is still in good health, there is a cash value given. The risk is that the premium paid is more expensive because the risk of claims will definitely occur. It’s rare for people to be healthy until the age of 99, right? In Indonesia, the life expectancy for men is 65 years and for women 70 years.
The cash value of the whole life policy can be used as loan collateral and there is a dividend bonus from the company for whole life policyholders . In addition, if they are unable to pay the premium, policyholders can withdraw funds from this cash value. This feature does not exist in term life insurance.
The next question, how much money will I get when the insurance period ends? Usually, insurance agents provide illustrations at the age of several hundred million. Again, don’t be dazzled by the illustrations that display the millions. This figure looks large at the moment, while inflation continues to erode the value of money and in due time, several decades from now, such a large fund is not really that big.
The reason is that the fund was only developed with a yield of only 4 percent per year. Much lower than the interest rates on the market. The yield of that amount is still not deducted by fees and taxes.
On the other hand, the real inflation rate has reached 12 percent. So that the cash value of whole life insurance will be eroded by inflation and the value is not as big as when the illustration is presented to prospective customers. It could be that, when the policy expires, this cash value will be very small.
The premium fee that must be paid to get coverage of Rp. 1 billion, for example, will be much greater than the premium fee that must be paid if you buy term insurance. How the difference is, can be seen in the writing regarding the calculation of insurance premiums.