What is life insurance and how does it work?

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What is life insurance?

In times like now more than ever, people are increasingly acknowledging and accepting just how unpredictable life is. With COVID-19 bringing changes into our lives in more ways than we could’ve imagined, one cannot help but question the uncertainty that lies ahead in the course of our lives. 

With that comes the inadvertent need to try and secure our future in the best way that we possibly can. If not for our own selves, we crave for the assurance of having our loved ones being taken care of. 

With life insurance, you can make that a realistic scenario. Life insurance is a type of insurance that pays out in the unfortunate event of your death. The payments you make as part of your contract are called “premiums”, which are later exchanged for the “death benefit” which is the amount of money the policy pays to your “beneficiaries”, this could be anyone close to you from whom you would want financial security. When you purchase a life insurance, you get into a legally binding contract between yourself, the “policyholder” and the insurance company. 

Why is life insurance relevant for me?

Statistics from 2019 show that only 55% Malaysians own Life Insurance because many people continue relegating its importance. As a matter of fact, regardless of your age, income or demographic- a life insurance is essential for just about anyone because it provides financial support to surviving dependents or other beneficiaries after the death of an insured. 

If you have a spouse and children, it is possible that the loss of income as a result of something unfortunate might leave a financial dent on your family which is survived by you. A life insurance can ensure that your kids will have the financial resources they need until they can support themselves. Conversely, if you are a healthy young adult who wants his parents to have a secure, stress-free retirement, then life insurance is one of the best ways with which you can achieve that goal.

From a business standpoint, if the death of a key employee, such as a CEO, would create a severe financial hardship for a firm, that firm may have an insurable interest that will allow it to purchase a life insurance policy on that employee.

However, no life insurance policy is like another. Each policy’s terms and conditions are subjective, depending on the individual. For the contract to be completely enforceable, the life insurance applicant must be transparent and  accurately disclose their past and current health conditions and any high-risk activities that they indulge in, such as drinking, smoking or actively participating in adventure sports, to name a few. 

After a life insurance policy has been purchased, in order for it to remain enforced, the policyholder must pay a single premium up front or pay regular premiums over time.

Okay, you’ve gauged my interest. But how does a life insurance work?

After life insurance is set in motion, it encompasses two main components – a death benefit and a premium.

The death benefit or face value as mentioned earlier is the total amount of money which the insurance company promises to the beneficiaries identified in the policy when the insured dies. 

The insured could be a parent, and the beneficiaries might be their children, for instance. It is the insurance company’s responsibility to determine if the proposed insured qualifies for the coverage based on the aforementioned factors such as age, health, and any hazardous activities in which the proposed insured participates.

Premiums are the money the policyholder would pay for their insurance. It can either be upfront or in increments. The insurer must pay the death benefit when the insured dies if the policyholder pays the premiums as required, and premiums are determined in part by how likely it is that the insurer will have to pay the policy’s death benefit based on the insured’s life expectancy. Factors that influence life expectancy include the insured’s age, gender, medical history, occupational hazards, and habits or hobbies which could potentially prove to be high-risk. 

Premiums are higher on policies with larger death benefits as well as the individuals who are prone to be at higher risk. 

Now that we established the imperativeness of buying life insurance, it is just as important for a potential policyholder to make sure that the insurance company is a good fit based on your requirements.  

How do I choose the right company to buy the insurance?

Given that there are a lot of insurance companies around with competitive rates, you might be tempted to buy insurance simply on the basis of price. 

However, it is important to note that there are other factors that are just as important as price.

Life insurance is a long term, high involvement purchase and you should make sure to act on your rights as a customer while zeroing in on the company in order to avoid getting lured into being misdirected. 

This is exactly why we at Policystreet do what we do- we strive to make insurance simple, easy and affordable for all our customers. 

PolicyStreet is an online insurance platform where you can compare and buy directly from renowned insurers! Policystreet stands out because of its reliable credentials, vouched for by the fact that it is approved by the Central Bank of Malaysia.

You can visit the website anytime and browse, explore and compare from the plethora of life insurance policies brought to you by renowned insurers. 

To get life insured and give your loved one the gift of financial security, all you need to do is : 

For more information, please visit our website https://www.policystreet.com/ or contact us personally at +60 3-3310 0063 and we’ll be more than happy to assist you with any queries!

+601 11-684 2590