Life insurance is a financial tool to manage our risks and loved ones. The assured will pay a consistent premium to trade for coverage limit from a life insurance company in case of death. That coverage limit is called life insurance capital, and the company will pay benefits to the assured under 2 conditions. 

1. Pay life insurance capital to the beneficiary in death case occurred during the coverage period.
   
   
2. Pay life insurance capital or other benefits as stated in the policy such as installment refund and full-contract refund to the assured in case the assured stay alive towards the end of the contract.

3. Endowment Insurance

It’s the life insurance that the insurance company will pay benefits to the assured who live up until the contract ends (including installment refund and dividends as stated in the policy) or pay insurance capital to beneficiaries once the assured pass away while the insurance period is effective. 

Endowment Insurance is a combination of life protection and savings. Savings are refunds that the assured receive when the contract ends and are considered a highly efficient tool for long-term savings which provides a higher benefit when compared with regular savings bank account. 

This insurance fits those who want to keep the money for the long-term including protection coverage, consistent returns to spend over the retirement period. 

However, with an equal premium fee, Endowment Insurance offers lower insurance capital than Term and Whole life Insurance so it’s not suitable for those who need high capital. 

4. Annuities Insurance

It’s the life insurance that the insurance company will pay an equal and consistent sum of money to the assured every month or every year, effective after the assured retire or reach the age of 55 or 60 and over. The schedule to start paying pension and its payment period will depend on the policy conditions. Therefore, we should select pension aligning with our spending plan in the future.

This insurance fits those who need consistent income like their retirement pension. As this insurance emphasizes savings, it offers less coverage when compared with other insurance.

5. Unit Linked Insurance

This insurance is also known as “Unit Linked”. It’s a new policy and an interesting alternative that offers a chance to the assured to manage risk and to invest at the same time, with the objective of exploring higher returns from an investment in a Mutual Fund operated by experts.

The mechanism of Unit Linked can respond to the needs of wealth accumulation through an investment in Mutual Fund for finding additional returns at acceptable risk level. More, it provides personal life protection under our supervision through compensation received in death cases. It’s also flexible and the assured can adjust the policy such as, increasing or decreasing insurance capital in line with their necessities. 

However, this insurance policy doesn’t offer a guarantee for policy value (no guaranteed returns) as the policy value depends on investment unit value which may be higher or lower due to the Mutual Fund performance. 

This insurance fits those who know an investment well and need wealth accumulation while wanting to arrange capital for a person in charge in the case of simultaneous death.
 

Above all, each type of insurance has different pros and cons, and each individual holds different status and financial need, so the need for insurance varies. Thus, we should consider buying insurance that matches our necessity, risk, and ability to pay insurance premiums.

 

Nipaphan Poonsathiensap CFP®, ACC

Freelance Financial Planner, Writer, and Lecturer