Monday, June 28, 2010

Introduction to Insurance Products

The rise of unit-linked insurance business today marks a shift in market penetration of life insurance from life insurance products to traditional life insurance products that promised a modern investment returns as well as better able to contribute to significant premium growth.
It is also not free from the influence that consumers have started to rationally define and decide what kind of products they want to buy insurance. The above statement is not an exaggeration aimed at a mechanism to
decide what product to buy and why should these products to be purchased.

Life insurance business is a service business, where the form is not a product produced in the form of goods but services and activities are abstract or "intangible". Services sold was a guarantee of protection for consumers (clients), relating to the life and the life within a certain period or for life. That is what is meant by the terms "life assurance", which should not be taken literally ie "life assurance", but "guarantees relating to life", wherein the related amount of money and time.

Guarantees in life insurance ranged from less than one year to lifetime, and the deposit will be exhausted gradually consumed in line with the passage of time. In it contained a promise of security from life insurance companies to provide compensation in the form of a sum of money if the insured is experiencing such events: death, disability, illness and reach old age. Guarantees are implicitly gives an assurance to its customers on problems uncertainty about lost revenues due to the occurrence of these events.
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In this first article will discuss several types of life insurance products marketed by life insurance companies in Indonesia and also recognize the benefits offered by any of these products are life insurance. Life insurance products offered on the market basically consists of three forms, namely Term Insurance, Whole Life Insurance and Endowment Insurance, where these products are categorized as traditional products. While life insurance products traditionally developed by attaching the instrument-the instrument of investment in it and the transparency of both the consolidated statement of costs and benefits that the insured will be obtained later, is categorized as a modern insurance products, such as unit-linked insurance products.


Many types of life insurance products offered by life insurance companies, which is basically a combined Endowment Insurance with Term Life Insurance and Whole Life Insurance. For example, Endowment Insurance with death benefits of two times or greater than the benefits due. There is also a life insurance product that provides death benefits in the form of sum assured plus all the premiums paid. Premium refund given if insured dies at any time, is a product of Whole Life Insurance. Endowment Insurance products in which payment of insurance benefits provided by either an annual or monthly periodical called Anticipation of potential future Endowment. Huge benefit given periodically be varied eg by increasing every year by 2%, 5%, 10% or more. Other types of Endowment Insurance products are often found in the market, such as:

• Scholarship Fund. This product is Endowment Insurance products are associated with school fees, usually known by the name of Insurance Scholarship, School Fee, and others.
• Gradual Fund. This product is also shaped exactly Endowment Insurance Pure Insurance Endowment, where if the insured is alive at the end of given year during the insurance period, insurance benefits will be paid certain percentage of sum assured.


The availability of various forms of instruments of money market securities, bonds and various savings programs, however, also has a direct impact on life insurance products, namely reducing the attractiveness of cash value life insurance policy traditional. Consumers more and more interested to participate in trading using a faster instrument profitable. State and tendencies to force insurance companies to create or design a life insurance products by combining the advantages of life insurance cash value (ie the nature of forced savings, etc.), and wide selection of products that provide higher profits. This product is called at the time of the creation of a universal life insurance.

During its development, many insurance companies issuing life insurance types of life insurance with the product or the same type of policy is accompanied with the advantages of each policyholder. The names of these products is also changing, for example challenger, complete life, solution and so on to attract prospective customers to buy its products. The names of life insurance products are in principle based on universal life products.


As described in the previous section, the development of life insurance products can be classified according to its period, ie traditional life insurance products and modern life insurance products. The characteristics of traditional life insurance products are: The

• Large coverage premiums and money fixed (constant) since the commencement of insurance until the expiration of insurance.
• predetermined premium payment schedule, for example, every year, six months, three months or monthly.
• Since the contract began in cash value policy can already known.
• Composition of the cost, mortality table and interest rate is not specified and is not known by the prospective policyholder.
• Large interest rate enjoyed by the policyholder is constant throughout the insurance contract.

While for modern life insurance products have the following characteristics:

• Composition of the premium specified separately between pure insurance premiums, fees and interest rates.
• All the details are known by the prospective policyholder.
• The premium payment and the amount of money can change coverage, and has no fixed schedule, modern life insurance product because it allows the existence of any additional premium.
• This product requires the administration of a far more complicated than traditional life insurance products, therefore this product has a share of premiums for a substantial investment and should be managed professionally.
• Prospective policyholders may decide where the funds (premium) are invested, such as stocks, bonds, money market deposits, time deposits and so forth.
• cash value of this policy is determined by the performance of the investment committee of insurance companies that manage, so that policyholders do not know exactly how much cash value he would receive if lapse.
• The form of life insurance Whole Life Insurance usually with added some riders such as personal accident and total pemanent and disability.

The characteristics described above, gives a better picture in identifying insurance products that are categorized as traditional and modern. Of course, every product has a value of plus minus if the views of any features mentioned above. The decision to determine which insurance products best suited to be purchased, into a comprehensive consideration for prospective insureds other than as a goal the protection of applicants itself. Consideration could be the return result will be the main preference in deciding to buy such insurance products. In the next article will discuss about the great benefits of buying a life insurance product.

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