Insurance Savings Plan: How Safe Is Your Money?
Not too long ago, we read an article on social media about a person who had paid multiple insurance savings plans for over a decade now realizing that the characters weren't what they signed up for, first time. The victim in this story complained that she had been led to believe that the premium would only have to be paid for some time so that "the police would take care of themselves". In addition to "sharing" this publication, many Internet users have come forward to share similar experiences. Some have even come to the feared conclusion that insurance companies are unreliable and insurance companies are not trustworthy. While others believed that the policyholder should have been more careful and exercised due care to prevent such an unfortunate accident.
Some also expressed concern about their insurance policy and coverage and feared they would become the next victim. Of course, such accidents give a very negative picture of insurance; However, this is not often the case. In these cases, I believe that many policyholders or financial consumers in Malaysia do not have a sufficient understanding of what an insurance policy is.
An insurance policy is a commercial contract in which the insurer and the policyholder (the applicant) are legally binding on both parties. The rights of the policyholder thus become the duty of the insurance company and vice versa. As a result, the financial consumer must understand his rights and obligations under this agreement and pay the premium as often as indicated. In this case, the policyholder had bought a property insurance plan or a general savings plan. It is an insurance contract where the insurance company agrees that if the contract holder lives long enough to cover the insurance period, he will pay the contract holder an amount of money, thereby reducing the risk that the insurance holder will survive the contract, What many of us know is that this policy pays the policyholder an amount of money following the Sales Representative document provided by the insurance agent.
However, what we do not understand is that this amount of money to be paid under the contract can be divided into two main categories: guaranteed and unsecured benefits. It is therefore of fundamental importance for us to first understand whether the "attractive" figure mainly comes from the unsecured or guaranteed part. Likely, most of the expiry benefits "promised" by the insurance agent are numbers that are hardly applicable when they appear in the "unsecured" column. This means that there is a risk that this number will not be assigned in the future. Of course, it can be said that this number must be possible; Otherwise, this would have no purpose specified in the document, would it?
Part of the possible reason for the default is that in this document, labeled "Sales Map", most of the figures are based on a forecast for the future, including the future investment environment. This also includes the expected interest on the bonds accrued by the insurance company, which generally generates between 4.0% and 5.5% per year (p. A.). If this interest rate is strongly related to the deposit rate and 5.5% pa (which is high), it is unlikely that the interest rate will remain the same for the specified time, therefore it is assumed that the accumulated bonds at this interest rate will increase 15-20 years. In this scenario, the final amount is very likely to be a very inflated number. So this is not realistic. This reduces the likelihood that the due dates shown on the sales image will be received. Let's assume that not all pictures are correct, right?
So let's look at the amount of bonuses the policyholder can receive. In the figure, there will be a good scenario (X) and a bad scenario (Y). Whether the year is positive or negative depends largely on the performance of the insurance company's fund involved. If the return on life of an insurance company's life insurance fund exceeds the scenario X benchmark, a higher bonus will be credited and vice versa. In general, the benchmark for X is between 6% and 7%, and since insurance companies invest most of their funds in prudent assets such as bonds, stocks, and real estate, performance is unlikely. Life is always maintained with an elevated watermark. As a result, the unsecured obligation is at risk of not being met as promised. It also depends on how the life insurance fund is managed.
Regardless of what the fine print says, as consumers we always have to understand our fundamental rights and do everything we can to protect them. In this case, consumers should note that some insurance agents use a table to create self-made sales pictures.
However, as consumers, we have the right to request a Product Information Sheet (PDS) and an official picture of sales. No image of the spreadsheet version. Besides, we have the right to cancel the policy within 15 days of receiving the contract. Don't just sign up to receive the contract and keep it in your drawer for ten years, just to revoke it and determine that certain clauses or conditions should not exist. In this case, it may be too late to do anything! In any case, consumers are encouraged to understand the products or financial instruments they are considering. Investing for a "promised" return can be like chasing a unicorn. We can never reach each other.
It's stupid to sign on the dotted line and invest the money that is so dear to you to make something if you don't take your life goals into account and don't know how that particular product or tool fits into your plan.
As an intelligent financial consumer, it is essential to first understand your goals and create a plan based on goals. It also means that we don't have to buy or invest in anything just because our friends or neighbors do. After all, personal finances should be very personal. We can't blindly follow others, can we?