There are lots of insurance available in the market. For ordinary people, it’s quite confusing and very hard to decide which one is best for us. Each insurance caters specific person base on several factors like age, financial status, medical history and other things.
For this blog, let’s discuss different types of insurance. There are several types of insurance base on various factors.
LIFE AND NON LIFE
This is a straightforward type of insurance differentiation. LIFE INSURANCE pertains to those insurance that we as a person can get and cover’s our own self. It covers a living person, insuring several risks that we might get along the way. Examples of life insurance coverage are death, disability, critical illness, medical and accident coverage.
On the other hand, non life insurance are for those non living things that we have. Some examples are car insurance, home insurance, gadget insurance like the Apple Care, unemployment insurance, etc. They tend to insure those things that we own against destruction and other risks involve. We both need these 2 insurance to gives us peace of mind.
4 TYPES OF LIFE INSURANCE WE NEED
There are 5 basic insurance type that we need to have: health insurance, critical illness insurance, accident insurance and life insurance. These are most likely offered by any big insurance companies in your area.
Health insurance covers hospitalization related costs. All causes of hospital admission are mostly covered. While most policies required at least 1 day of hospital admission to claim, they also have pre and post hospitalization coverage and other things. Choose the best plan that suits your needs. The higher the coverage, the better. In Philippines, we have what we called HMO insurance. This are insurance policies wherein if you are admitted to HMO companies accredited hospital, you are entitled for the coverage. You just need to present your membership card and your bill will be taken cared of your HMO card. Depending on your coverage maximum payout, you may or may not required to topup. On the other hand, non HMO medical insurance offers reimbursement only. Meaning, you pay the hospital first and file a claim afterwards. Try to search what is the best option you have in your place.
Critical illness insurance gives you lumpsum payout upon diagnosis of critical illnesses. Take note that illnesses have stages and severity, make sure you get a critical illness policy that covers all those stages, and not just the major stage. Old policies only covers major stage of illnesses, so if you still have time and healthy, try to change it or upgrade to cover all stages of illnesses.
Accident insurance gives you coverage in the event of accidental death, accidental dismemberment or accident medical treatment. While hospital admission due to accident is covered by medical policy, sometimes outpatient treatment is not covered by it. In accident scenario, most of the time outpatient treatment is required. Thus, you can claim under this policy. Plus it gives lumpsum payout for accident worst scenario like death or dismemberment.
Life insurance basically cover’s death and total disability. It gives lumpsum payout in the event any of these 2 events happen. Death coverage is important for our beneficiary, so that they can continue to live even with out our support. It is for their purpose that is why we need to have this policy. For total disability, we are mostly likely still alive but are not functioning like before. This includes those who are bed ridden, paralyzed, in a wheelchair or those with dismembered body parts. We are still alive upon claim and we can surely use the payout to continue living.
4 TYPES OF INSURANCE BASE ON POLICY
Insurance policies can be described as term insurance, endowment insurance, whole life insurance and investment linked insurance.
For term insurance, this is the type of insurance where you pay for the coverage only. There is no cash value, and attachment. This is the cheapest type and cover’s all our needs for insurance. As long as we are paying, we are covered. It will terminate once we stop the payment. Once stopped, there is no cash back we can expect. You get term insurance anytime as long as are you still insurable. The only downside is, price tends to get more expensive as we grow older.
Whole life insurance covers us till age 100 mostly. There can be limited pay or regular premium till the end. Most of the time, people choose limited pay option. For example, pay in 10 years and you are covered for life. This is a good policy, only that the price is high considering that you only pay limited period and get insurance for life. The policy has cash value, but you cannot easily withdraw it. This funds are also invested in a low risk type of investments to guarantee the future payout.
Investment linked policy on the other hand is an upgrade of the whole life plan. It offers great enhances and flexibility on the funds. Part of the premium you are paying on this policy is invested on funds which you can choose. If in need of money, you can also do partial withdrawal on the policy and you are still covered. As the fund continue to grows, you have the option to stop paying the policy or skip paying, as long as the fund can sustain the insurance cost of the policy.
Endowment insurance on the other hand, focus on future savings with extra insurance cover. It is usually useful for future use and savings. For example, you can get a 10/18 endowment plan. It means, you pay for the net 10 years and get the maturity benefit on the 18th year. On the end, you’ll get all your money plus the small investment return it accumulates over time. You cannot choose where this funds are invested. You also don’t have the option to do partial withdrawal of the fund value. For those are savvy investors, they tend not to choose this plan. Insurance coverage is only active while the plan is still enforce. Once the policies matures and you withdraw all your funds, the insurance also terminates.
OTHER TYPES OF INSURANCE
There is also insurance for retirement or annuity insurance plans. These are designed to give us specific amount of money during the golden days of retirement. This is one of the best plan that we can get to prepare for the future. Most of the policies offered on this type are limited premium. You just have to choose when you will start, when you will retire and how much income you want by that time.
Aside from this types, each insurance companies offers a lot of insurance policies. It can be overwhelming to know all the details. It is our responsibility to learn and know what insurance we are buying. Do not just rely on the agent to discuss everything we need to know. Do your own diligence to get the best policy for yourself.