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Life Insurance Basics - Intro to Traditional Life Insurance and Investment-linked Life Insurance - YouTube
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insurance we all need it but is it clear
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to us why exactly essentially insurance
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is protection but what does it protect
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us against every family has a
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breadwinner at least one or two if both
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parents earn income now there are four
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threats to a breadwinners capacity to
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earn income premature death disability
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getting diagnosed with a critical
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illness and old age retirement insurance
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is a way to protect the family's income
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and way of life from these threats this
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is what's called family protection there
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are multiple types of life insurance
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products let's zero in on two
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traditional life insurance and variable
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unit linked life insurance also called
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investment linked life insurance let's
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break it down further if you have what's
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called traditional life insurance you
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are provided a protection benefit plus
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savings equivalent to a cash value cash
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value allows you to loan from the
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savings to spend for a need like a
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source of cash for certain purchases
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emergency fund supplement for retirement
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funds this cash value is also called a
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living benefit because you enjoy it
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while you're still living due note
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however that interest charges still
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apply to policy loans and if you're
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unable to pay it back
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this will be deducted to your death
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benefit so we must be responsible when
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enjoying the living benefit there are
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two types of traditional life insurance
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permanent and temporary also known as
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whole life and term life whole life
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insurance covers the insured person for
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their entire life he or she stands to
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receive the death benefit or pay out
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upon passing away there are three types
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you can choose from depending on the
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payment method there is regular pay
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where you have to pay for the whole life
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coverage for your well whole life - then
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we have the limited pay where you'll pay
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for the whole life coverage for a
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limited time only say five seven ten or
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fifteen years lastly we have the single
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pay where you'll pay for the whole life
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coverage once whole life also gives the
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insured the chance to accrue cash value
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in the form
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savings or earnings on the other hand
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term life insurance only guarantees the
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death benefit for a limited period of
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time say within 1 5 10 or 15 years only
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at the same time you're only required to
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pay for the plan during the years you
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are covered two so four term if the
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insured survives beyond the period
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specified in the plan then the
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protection benefit expires
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however the insured does have the option
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to renew the term life insurance for
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another term if he or she wants to
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continue it
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now what about investment linked life
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insurance as the name suggests this type
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of life insurance has an investment
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component on top of the protection
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provided it also requires higher
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premiums than traditional products
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because a portion of it is set aside for
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funds invested in stocks bonds and or
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other types of financial assets managed
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by expert fund managers you should
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select a fund that matches your
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financial objectives and risk appetite
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this living benefit or cash benefit is
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known as fund value because of this
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feature investment linked life insurance
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offers potential faster growth of your
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money versus the traditional products
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and their cash value but it also comes
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with investment risks which means it
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does not guarantee returns if your
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chosen fund does not perform well it
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will grow less than expected or may even
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decrease in value you may need to make
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additional premium to keep your policy
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active and so the value of your
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investment linked life insurance funds
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may decrease due to several reasons
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including extreme downward market
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volatility withdrawals charges when
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policy is surrendered before its
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maturity and others upon maturity of the
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investment linked policy the policy
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owner also gets a maturity benefit
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investment linked life insurance is also
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flexible
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depending on your risk appetite you
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personally decide which fund you'd like
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to invest in and switch to a different
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one should your financial goals change
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this allows you to take charge on what
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you want to use your potential earnings
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for both traditional life insurance and
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investment linked life insurance have
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benefits and risks
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but your decision on which to choose
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should depend on your overall financial
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plan and goals
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