INSURANCE
When Should You Get Supplemental Life Insurance?
Some employers provide term life insurance and medical coverage for their employees, and the amount of coverage is generally some multiple of the employee's annual salary. However, sometimes the amount of coverage that a company offers is insufficient, particularly if the employee has a large family or big financial liabilities. In those situations, supplemental life insurance can bridge the shortfall in coverage and provide added protection.
Term Life Is Not Sufficient
Most consumers purchase one of three types of coverage options or a mixtures — term life insurance or whole-life insurance. With term life insurance, the insured receives coverage for a set period, which is known as the term of the insurance. Both employers and private companies offer term insurance. Since the coverage only applies during a set period, term life insurance generally costs less than whole-life insurance, which covers an individual for his or her entire life.
One major problem with term life insurance is that most policyholders rely on their employer for this insurance, and as a result, they don’t have enough coverage. A 2015 study by the Life Insurance and Market Research Association (LIMRA) found that 65% of employees with employer-sponsored group life insurance believe that they need more insurance than the employer provides. A typical employer plan provides coverage equal to one to two times the employee’s annual salary. For example, an employee making RM60,000 annually may receive a RM120,000 policy at no cost. For a single employee or an employee with one dependent, this may be adequate. However, an employee with a bigger family may require several times that amount of coverage to take care of a spouse or children if he or she unexpectedly dies. Supplemental insurance can fill in the gaps of an employer-sponsored plan.
Whole Life Is Expensive
Whole-life policies present similar coverage shortfall problems. Most whole-life policies cover individuals for their lifetime and build up a cash value, which allows the insured to cash out the policy if needed. However, since whole-life insurance offers more complete coverage, it costs much more than term life insurance. For an individual with a large family, obtaining the right amount of whole-life insurance may be prohibitively expensive. Generally, purchasing supplemental term insurance offers a more cost-effective option.
Investment-Linked Insurance Has Uncertainty in Surrender Value
While investment-linked insurance might be the most popular insurance plan, it does have some drawback to it. For instance, the surrender value projected in uncertain and you might surrender the policy at the worst of market conditions and directly affecting your return.
Investment-Linked Insurance Has Uncertainty in Surrender Value
While investment-linked insurance might be the most popular insurance plan, it does have some drawback to it. For instance, the surrender value projected in uncertain and you might surrender the policy at the worst of market conditions and directly affecting your return.
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