Insurance or Investment: Which One Is The First?
If financial planning is like a house, then cashflow management, debt management, and emergency fund are its foundation. Meanwhile, insurance is its wall that protects the people inside and investment as its roof.
Therefore, before investing, it is a good idea to start building your house’s foundation and walls first.
If you want to know how to build your foundation correctly, you can read this article.
A. Definition of Insurance
According to the Indonesian Dictionary, insurance is an agreement between two parties: the customer (who bought the insurance) and the guarantor (the insurance company), if something happens to the customer or the customer’s property following the agreement. Thus, customers can reduce or transfer financial losses to the insurance company due to unexpected events such as illness, accidents, and/or death.
B. Types of Insurance
In general, there are two types of insurance, namely general insurance that covers properties such as homes and vehicles. The second one is life insurance that protects humans, such as health insurance and critical illness insurance.
1. Health Insurance
Health insurance is a type of insurance that covers the health or care costs of insurance members explicitly if they get an illness or an accident. Generally, there are two types of coverage offered by insurance companies, which are inpatient and outpatient care.
Everyone needs this type of insurance, so you would not need to withdraw or sell your assets when you were sick or had an accident.
This type of insurance is highly recommended if you are young and healthy because it will be more expensive when you are older.
2. Life Insurance
Life insurance will protect the family’s financial condition who is left behind after the insured passed away until the youngest family member can live independently. Therefore, life insurance is needed by the breadwinner of the family so that:
- The bereaved family will have sufficient monthly income after the insured passed away.
- The family will be protected from debt.
- The family could obtain the inheritance.
When looking for life insurance, one of the crucial things you need to consider is the sum insured. Will it cover your family’s needs?
C. Tips for Choosing Insurance
Here are some tips for choosing health and life insurance:
1. Know your needs:
There are several ways to find out which life insurance you need. One of them is calculating the total living cost (both needs and lifestyle) if the breadwinner has to experience life risks such as permanent and total disability, critical illness, and even death at an early age. The entire living cost is usually calculated until the smallest child (youngest family member) reaches the independent age.
Get to know your needs, one of them in which country do you need protection from this insurance?
What kind of hospital room do you need? Standard or the VVIP room?
Buy the insurance with the benefits you would need, from hospital room coverage to the types of illness coverage. Also, pay attention to the kinds of diseases that are excluded or other special conditions.
2. The total monthly premium is not more than 10% of the monthly expenses.
To start having insurance, it’s a good idea to make sure your entire monthly life and health insurance premiums don’t exceed 10% of your monthly expenses so it won’t interfere with your cash flow.
3. Check the claims track record.
It is vital to check the claims track record against insurance companies so you know how the actual claiming occurs in the field, whether it was following the agreement or not. Also, make sure you have already reported any history of previous illness that you have previously suffered so that there is no failure to claim insurance due to dishonesty (non-disclosure of pre-existing conditions).
4. Ease of communication and access to information
Ease of communication and access to information between customers and insurance companies or agents is needed because insurance is a long-term contract.
That’s all Moduers, the things you need to know about insurance. Its existence is vital to protect the future of your family and the outcome of your hard work.
So, investment first or insurance first? Now, you can have both since Trimegah Asset Management has presented TRAM Consumption Plus, an equity fund that offers life insurance facilities. You can get a sum insured up to IDR 500,000,000 without additional premium fees and no deduction of investment value under these conditions:
- Investors have good health.
- 18-69 years old.
- Have a minimum IDR 5,000,000 investment balance at the end of the month.