In the beginning of 2022, the news page CNBC There have been several reports of non-life insurance products. The news states that customers who use this service will receive 100% returns with 99 years of coverage, even if they only pay premiums for 10 years.
In fact, after 10 years of service, the client receives only 30% of the contract and pays a lifetime premium. As a result, they lost up to 5-6 billion rupiah.
However, what exactly is unit linked and can this insurance product benefit the customer? Check out the discussion below:
Overview of Unit Links
Unit linked is an insurance product in which part of the premium is allocated for investment, especially investment in mutual funds. when purchasing unit-linked products Customers will not only benefit from insurance coverage. but also get investment benefits.
At first glance, it is definitely beneficial to the client because by paying one premium, the client receives 2 benefits at the same time and the client does not have to bother with managing investments as the funds are handled by experienced investment managers. his field
But actually choosing this product must be careful as well. As this product is often offered as a long-term insurance product, in addition, unlike other investment products, clients of this insurance product are not able to independently manage or even track their investments. Clients need to learn these two financial concepts at the same time in order not to lose money because this product combines two types of financial industry products with different concepts.
In particular, mutual funds as investment instruments consist of several types with different levels of risk and return. Customers therefore need to observe and inspect different parts. of the policy thoroughly, such as the percentage of premiums spent on investment What is the allocation of investments for?
Can unit link be profitable for customers?
Unit-linked insurance can benefit clients if they:
- View this instrument as an insurance product. Although it provides investment benefits. But this does not rule out the possibility that the premium percentage used for investments will be relatively small. Unit linked is not an investment product.But it is more likely to be an insurance product. In addition, this product has a different cost structure than conventional mutual fund investments. Therefore, it is possible that the nominal gains received will be relatively smaller compared to the returns received on direct investments of similar mutual funds.
- Understand the concepts of insurance and investment. Insurance is a financial product that is intended to provide protection or assistance to the customer if the customer suffers something unpleasant. Investing is a financial activity aimed at obtaining both monetary and non-monetary benefits in the future. A mutual fund is an investment instrument based on the Collective Investment Contract (KIK) concept. In this instrument, investments from investors are concurrently collected and managed by investment managers, and profits are shared.
- Read the policy carefully.. Once again, the unit link is married. Insurance and InvestmentTherefore, do not be surprised if the contents of the contracts in this type of policy are somewhat longer or more complex than other investment products. However, the policy descriptions need to be understood by the actual client and therefore must be read carefully and carefully. Make sure the insurance agent serving you answers your questions as best as possible. and the description is in accordance with the information specified in the policy
- Customers choose unit-linked products from trusted companies.. Currently, insurance services are not only provided by insurance companies. Many banking companies also offer insurance products such as unit linked as an additional service. To be successful in obtaining both protection and investment benefits. Customers need to choose this product from a trusted insurance company or bank. Also, do some background, portfolio, and company background checks before selecting this product.
Is Unit Link a scam?
Simply put, unit linked insurance is not a fraud or a scam if it is offered by a legitimate financial institution in Indonesia. This is because these financial institutions’ products must be approved by OJK before they can be released to the market, otherwise OJK will sabotage the program’s services. Therefore, it is important for customers to choose honest insurance companies and banks to purchase this product.
Some of the big brands that offer this service include Prudential, Allianz, CAR Insurance, and BNI Life. What if I bought this at the company and still lost my money? This may be because you have not read the policy carefully or because the investment instruments included in this product are experiencing losses.
Can linked units be converted to cash?
According to the official page Indonesian Life Insurance Association (AAJI)Funds stored in unit-linked units can be disbursed for a certain period of time as long as the customer is alive. Of course, the details of the disbursement period for this insurance product will vary according to the policy of the insurance company and this policy must be written on the policy so that the customer can read it.
Due to this disbursement condition This insurance product is relatively more liquid compared to normal insurance. which can be disbursed only when there is a risk specified in the list But it has less liquidity than direct investment. Because the process of disbursing investment instruments, whether mutual funds, stocks, bonds, can generally be done at any time, although it takes 2-7 business days.
Traditional insurance or unit linked insurance, which is better?
In addition to liquidity The difference between traditional insurance and unit-linked insurance lies in the benefits, risks and small premiums. Unit-linked insurance has two advantages: Insurance Coverage Benefits and benefits in the form of investment gains
Due to these two different benefits, unit-linked insurance is subject to a risk of a decrease in unit value. Of course, this doesn’t exist in conventional insurance products. Because all ordinary insurance allocations are for protection only. not for investment
for a small premium In general, unit linked insurance premiums are relatively more expensive compared to traditional insurance. The reason is that there are additional costs. which is different from traditional insurance in this type of insurance The small premium paid by the customer includes all cost components.
From these 3 differences, it can be concluded that unit-linked insurance is suitable for customers who can accept higher levels of risk compared to normal insurance. And what type of customer are you?
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