Protection Before Investment

Life insurance protection (term) plans, though cost-effective, have found few takers in recent years. The value proposition is huge, but it is yet to gain popularity among customers.

 

Why do you think people are reluctant to buy term plans?

The perception towards protection is that one does not get anything in case one outlives the policy term. Most people overlook the fact that it provides financial security to the family if the policyholder dies before completion of the term.  

 

The rates for protection premiums have fallen by over 50 per cent in the last 15 years due to increased awareness about healthy living and availability of rich data on mortality collected by life insurers. We insure our goods, property and other assets against damage or loss, but life, which is the most important aspect, is left uninsured. While property can be rebuilt, life lost cannot be replaced.

 

What should customers be aware of while buying a term plan?

Term insurance is the first product that one needs to buy while creating a financial portfolio. One needs to ensure that the life cover is adequate to take care of the family and then focus on building a savings pool. Secondly, one needs to ensure that the quantum of protection (the sum assured for the term plan is commensurate with the financial support the family will need in the absence of the policyholder). One needs to select a life insurer with a consistently high claims settlement ratio to ensure that the family receives the policy proceeds in a hassle-free manner.
What in your perception would be an ideal protection cover?It is simple - based the sum assured of 5 to 10 times the annual salary. This life cover should continue until retirement or till adequate corpus is built to take care of dependants.

 

The opportunity that you see in the term product category

Large sections of our populace are either underinsured or uninsured. Given the fact that by 2020 a majority of our population will comprise young working individuals, the demand for financial protection will only grow. Various reports has highlighted the size of the mortality protection gap for Malaysia.

 

Have there been any changes in term plans in recent years?

Plenty, particularly on the product front keeping pace with evolving needs of customers. In the past, individuals needed to buy multiple products, such as one for life, one for health, accident cover, etc. Now, there are products providing the benefits of different products in one. Customers, therefore, need not worry about managing separate policies. To provide financial support, plans these days provide nominees the option to receive payout in the form of regular income. 

 

Which financial services product should customers buy first?

Protection is the need of every working individual. The term plan will provide a safety net to the family. So, an individual should purchase a term plan before proceeding to develop a financial plan to achieve long-term goals. A term plan will ensure that the family is not left financially vulnerable in case of demise of the policyholder. A savings-oriented financial plan can be developed subsequently.