5 Mistakes in Choosing nsurance

Life insurance is very important. But a lot of wrong when buying life insurance. As a result, premiums become expensive, benefits are not optimal. What is the error and how to avoid it?
What are the 5 mistakes when buying life insurance?

1. Life Insurance Sum Insured Is Too Small

What is the sum insured (UP) of your life insurance? You remember ?
Many do not remember or do not even know. Whereas UP is very important.
UP is the reason to buy life insurance because it is a benefit paid insurance company if the insured died.
That's the reason, you're buying insurance.

The problem is, many think that UP life insurance they buy is great, although the reality is not.
For example, sum assured Rp 200 million. The money you think is pretty much right now because that big money is not in your savings right now.
But, in fact the amount of 200 million is small for a life insurance protection. Why?

• if your family's living cost is now Rp 10 million per month, it means that the sum insured is only sufficient for the families left behind to survive less than 2 years.
• every year the cost of living rises following the inflation of 6 - 7%, so the sum assured value of Rp 200 million, within 2 years of real value or purchasing power dropped to Rp 178 million due to rising goods prices. Increasingly years, the purchasing power of insurance money is decreasing.
Therefore, the coverage of UP is very important. The value should be sufficient.
How to calculate it is easy.

The estimate is the value of UP multiplied by 1% equals the cost of living per month. So, if the current cost of living is 10 million a month, the minimum UP is Rp 1 M.
The value of the UP should continue to be evaluated to match the rising cost of living and price inflation.

2. Investment Focus, Not Life Protection

Quite often I see people have life insurance, but the focus is on the value of the investment, not on the protection.
"How much money do I receive if I do not claim", is a question that often arises, which actually shows the focus on investment.
The amount of protection value of insurance money is not really ignored. Whether the UP will be enough or not to protect the family.

It is true that the value of the investment will be added to the sum insured if the insured dies.
But related to the value of investment, we must remember that
• Investment performance is uncertain, fluctuates depending on market conditions and selected instruments.
• In unit-linked life insurance, the value of investments is much cut to pay insurance costs. Moreover, if you choose a short payment of only 10 years (known as 'premium leave'), then the value of your investment will be deducted to pay the insurance fee during your premium leave. That way, the value of investment becomes smaller because many pieces.

Thus, although there is an investment value that can increase the sum insured, the amount is uncertain. Do not rely on investment returns for life insurance protection.
You should focus on the value of UP in life insurance. Because the UP is guaranteed by the insurance company will be paid when the insured suffered a disaster.
You are obliged to make sure the sum insured is large enough to protect the family.

3. Not All Need Current Life Insurance

We first understand the purpose of buying life insurance, which provides benefits (sum insured) to the heirs if the main insured dies.
That is, there are people whose lives depend on you financially, which if you die, they lose the source of income, so it takes financial protection from life insurance.
In other words, if there is no one whose life depends on you financially, no point has insurance. Because if the insured suffered the death of no family or people whose source of income is disrupted.
Who for example those who do not need insurance?
Fresh graduates who are just entering the work, not yet have dependents. Singles are still alive and there are no dependents.

For me, if not yet necessary, why should buy now. Eman - a friend of his money.
Better money to pay insurance premiums re-allocated to other things more important. One of them is having a Pension Fund.
Already have a dependent or not, it does not matter, you definitely need money to retire. That's our primary need.

Most do not have, or if they have, relied on an inadequate retirement from the workplace compared to the cost of living when they were older.
Because they do not have a pension fund, still according to the survey, people rely on children during retirement. "A lot of kids, lots of luck".

4. False Insured in Policy 

In a life insurance policy, the insured is the party, which if he dies, then the insurance company will pay the sum insured. Assignment of the insured is often wrong. For example, the child is designated as the insured; wife who does not work as the insured. Neither the child nor the unemployed wife have a financial risk to the family because if they are unfortunate there is no lost source of income.

Because they do not provide income in the family. The insured is a party that is a source of income for the family. Can husband can wife, as long as they provide income. Ideally have two life insurance for both husband and wife to work together. If the wife's salary is bigger, he should have an insurance first. Not a husband. Choose the largest income because he who has the greatest financial risk.

5. Do not Need Unit Link

Am I opposed to unit link? Absolutely not. Unit - Link is one product that has benefits for the community. However, based on observation including attention to questions and comments on the blog, I found many people who have insurance plus investment, ie unit-link, although they actually do not need this type of insurance. Why this person does not need Unit Link? There are two conditions. First, they are already actively investing, for example gold, mutual funds or property.

They will be more efficient (cheaper) to buy direct investment rather than through intermediaries. In a unit - link, investments are made through an intermediary, ie an insurance company, with the implication that there is an additional cost for such intermediary services.

Therefore, I suggest for those who already have a better investment continue its investment. Instead of taking via an intermediary, there are additional costs that will reduce your investment funds. What if need insurance? Is not it really convenient to have insurance and investment products. If there is an investment, while only need insurance, you can buy pure insurance that no-frills investment. Pure premium insurance (term life) is cheaper with high insurance coverage.

You will get more optimal benefits. Secondly, young people are still single who already have unit-linked life insurance with a significant monthly premium, but they actually do not need life insurance because no family is financially dependent on their income. So what they need is not insurance but investment. If not necessary, why should buy. Since the purchase of this product is the cost, there is a premium to be paid each month. So, be careful when choosing insurance. Do not get the wrong choice.