Like other financial solutions, insurance can support your needs while it is also designed to be customizable for your plans. In choosing insurance, you not only take into account the policy period, but also the benefits and risks that may occur to avoid misunderstanding. For example, it may take a long time after a unit link insurance policy has been issued to understand its risks. To understand these risks, you can ask the Bancassurance Life Consultant of PT AIA Financial (“BLC AIA”) before you agree to the illustration and decide to buy the Policy.
Furthermore, you need to know the difference between traditional insurance and unit link (PAYDI) because our needs may differ from one another. So, what are the differences? Let’s have a look at the explanation below.
1. Benefits
Traditional life insurance consists of 3 types of insurance products, namely term life insurance, whole life insurance, and endowment life insurance. The basic difference between traditional life insurance and unit link insurance is in the benefits. In traditional life insurance, the benefits offered are coverage benefits or protection without any investment element in it, which is often referred to as pure life insurance. Meanwhile, unit-linked insurance is life insurance that within it contains an investment element.
In unit link insurance, part of the premium you pay will be managed by the investment manager according to the investment fund you choose. The management of the investment fund value may change (increase or decrease) according to the performance of the investment fund you choose, where the amount of profit or loss cannot be determined and it will affect the benefits you receive at the end of the insurance coverage period.
You are advised to continue to monitor the benefits (balance of the Account Value) if you have unit link insurance.
2. Risks
In insurance, risks can happen. Especially for unit link insurance, since there are investment benefits, it also contains a risk of decreasing the price of the participation unit. This causes a risk where the investment benefits you get will be less than the value of the investment benefits listed on the illustration sheet. But on the contrary, if the price of investment participation units increases, then the benefits obtained may be greater than the value of the investment benefits listed on the illustration sheet.
3. Premiums
The premium paid depends on the age, gender, or insurance benefit you want to get, which reflects in the premium amount that may differ from one Insured to another. In unit link insurance, some costs are deducted from the account value such as acquisition costs, administrative costs, maintenance costs, and other costs. Unlike unit link insurance, premiums in traditional insurance already cover all cost components.
Whatever you choose, make sure it suits your needs and you understand all the provisions in the Policy before agreeing to buy the product. For further insurance information, you can consult with Bancassurance Life Consultant (BLC AIA) at BCA branches.