Show all / Hide all

1. Why do you need Life Assurance?

Life assurance should be an essential part of every person’s lifespan plan. Upon death and disability or sickness and/or retirement, life assurance provides financial income to yourself and/or your beneficiaries. It may also provide safety net to pay off your personal debt so that your dependents are not burdened with additional financial obligations.

It’s a plan of good conscious and a financial safety net in times of unexpected death, disability, sickness and retirement. An important feature of life insurance is that the amounts paid to you or your beneficiaries are not subject to income tax.

2. How much Life Assurance do you need?

You should base the amount of life assurance on your current financial and your family’s needs. You could ask, “How much current financial obligation do you have? How much does your family need to protect them in case of your death/disability, sickness, and retirement?” The following are some considerations and determinants: -

• Immediate financial obligations upon death – final medical expenses, funeral costs, and estate taxes;

• Funds to cover life adjustments for survivors – previous debt, cost and time of job search and/or possible re-location;

• Ongoing expenses – monthly bills, rent, mortgage, school tuition, day-care, medication, day-to-day basics, and retirement needs;

• The number of years and income would be needed by your dependents;

• The standard of living you would like your dependents to have;

• The amount of outstanding debt you would need to pay off;

• Other sources of income that would be available to your dependents;

• What your dependents’ future educational needs will be.

An often-used general guideline is that your life insurance should cover 3 to 10 times your annual gross income.

It is also good idea to frequently review your needs in relation to your policy since adjustments are needed, your policy can be reviewed accordingly.

3. What should you consider if you want to replace your current policy?

Changing from your current policy to another is an option and your right, but may not provide you any significant advantage. Chances are you will pay a higher premium for a new cover – if only for the fact that you are older or your health has notably changed.

A better alternative may be to ask about additional options or riders to your current policy.

4. When should you purchase Life Assurance?

The best time to purchase life assurance is usually determined by the individual. Usually, it is now! ---- If it has not been done before! If you feel you have people you want to protect, or a significant debt you wish to avoid passing on to your family - related to death, disability, medical expenses and or retirement - then you should purchase a life cover now!

It is never too early to plan for the unexpected. Depending on the type of policy you choose, it would be a good means of contributing towards a fund you can draw on sooner than later.

5. What do you need to consider when naming your beneficiaries?

Be explicit when naming a beneficiary. Name a contingent, or secondary, beneficiary as a precaution, in case you outlive your first beneficiary. Occasionally, at least annually, review your designated beneficiaries because you may have married or had another child in the family or one of the beneficiaries may have changed his or her name or address.

6. Can you get Life Assurance if you have a pre-existing medical problem?

It depends on what the illness/medical condition is. The material facts will be elicited through a medical examination report from any of our medical examiners.

Today, it is often likely that pre existing medical problems be controlled with treatment, prescriptions, and diet. We will take these factors into consideration.

Also, there sums assured which do not require medical examination, issued under free cover limits.

7. Can a Life Insurance Company cancel existing policy if policyholder develops a serious illness after he/she is already insured?

No, a life insurance company cannot cancel an existing policy due to the onset of a serious illness. However, benefits can be denied if it is determined that a policyholder knew they had the disease prior to applying for the insurance and misrepresented or concealed the fact(s) in their application.

8. Why shouldn't you surrender your policy? What options are there but surrendering your policy?

Policy Surrender

The majority of endowment policyholders do not maintain their endowment policy until the end of the policy term. There are many reasons why the original policyholder may want to surrender their policies before the maturity date, including dissatisfaction with performance, personal circumstances such as need to finance children’s education, to pay a charge on mortgage or a need to generate capital.

However, simply surrendering your endowment policy should only be undertaken as a last resort.

The reason for this is that most with profit endowments to not grow in a linear fashion. They generally grow quickest near the end of their life, especially owing to the large terminal bonuses that are added at the end of the contract period. For this reason, cashing in the policy early can leave you with a greatly diminished sum of money, often even less than you have actually paid in.

You will also suffer what the life assurance "early surrender penalties" - which amount to charges deducted from the current value of the investment. The reason for early surrender penalties is that there are early charge deductions on the assumption that you would have maintained the policy for the agreed term.

Alternatives to surrender

Fortunately, there are plenty of options discussed below which are open to the policyholder apart from surrendering the policy, such as automatic premium loan, paid-up insurance, and redating. Unfortunately, very few people actually know what they are.

The six options available to a policyholder are:

1. Retain your policy: Even if your policy is underperforming today, there is some chance that it may recover in time to meet your investment target by the end of the contract. Historically, endowment policies that have reached maturity have produced very good returns for the policyholder.

2. Take a Policy Loan: ICEA Limited offers a policy loan facility in her endowment policy contract, whereby the policyholder can take out a loan secured against the policy to solve short term cash flow problems and still allow you to retain your policy. The loan may be repaid out of the final proceeds of the policy at maturity date, on surrender or on a valid claim. You can also elect to repay the loan on request.

3. Paid-up Policy: This is where no more premiums are being paid to your plan. Life cover will continue with charges being deducted from the value of your fund. Your fund value, at the time your policy becomes paid-up, may be sufficient to continue to provide life cover right through to the maturity date of your plan, and any surplus funds remaining at the maturity date of your policy would be paid to you.

4. Redate your Policy: After your plan has been in force for one year and one year's premiums have been paid, if you stop paying premiums, you can realise any value in your plan and take it as a cash sum. The policy contract then ceases as do all benefits under that contract.

5. Automatic Premium Loan: This option allows the policyholder to take a loan from the cash value of the policy so as to continue paying premiums and at the same time keep the policy in force. . Once the cash value of your fund is fully utilized in paying the premiums, it becomes nil, cover will cease and no further benefits will be payable.

6. Surrender your Policy: In ICEA whole and endowment policies, after your plan has been in force for three years and three year's premiums have been paid, if you stop paying premiums, you can realise any value in your plan and take it as a cash sum. Hence, it pays to wait until the contract builds cash value.

9. Are the premiums and maturity proceeds for life assurance policy tax-deductible and not subject to income taxes?

Yes, but if your employer pays your premiums, your benefits will generally be taxable as ordinary income. Generally though, there are reasonable tax-incentives for long-term insurances, both in premium and maturity proceed terms, as there are incentives for pensions purchases.

10. What happens if you can’t continue paying your premium payment?

You have the option of suspending premium payment, or subsidizing your payments with policy bonuses, if any. If you take the first option, then your policy options would be: -

• Paid-up insurance – in this option, you can use the cash value to purchase an insurance policy with a lower death benefit.

• Extended term insurance – you can use the cash value to buy a term policy death benefit equal to that of the original policy.

• Receive the cash value – you can receive as a single or as instalment payments.

• Utilise the 30-day grace period on your policy in order to arrange for payment before your policy lapses.

11. Can a Life Insurance Company refuse to pay death benefits if the policyholder knowingly provides false information?

Yes, a life assurance policy is generally invalid if the policyholder knowingly provides false information to the insurance company and dies within two (2) years of receiving the policy.

However, the false information has to be ‘material’ to the decision at the point of issue the policy. Hence, mistakenly providing the wrong address will not invalidate a policy, but not disclosing a pre-existing medical condition could.

12. Are employer-sponsored group disability insurance policies “portable” i.e. can you keep your coverage even if you lose your job?

No, most group disability coverages are not “portable”. So, when you leave your employer or the group, you lose the life assurance ----- hence, the reason for purchasing your own individual life assurance covers while still working.

13. How are policy loans treated?

When a policy loan is taken, loan interest is charged, usually at market rate, from the date of the loan to the next policy anniversary. Each year on your policy anniversary, you will be billed for the annual loan and interest, based on the outstanding loan balance. If the interest is not paid, it will be added to the outstanding loan balance on your policy. If the policy has an outstanding loan at the time of your death, this amount will be deducted from the death proceeds.

14. What questions should you consider in borrowing against the cash-value of your policy?

If borrowing against the cash value of your policy is an option, here are the things you need to consider: -

• Is there a limit or restriction on the amount of the cash value I can borrow?

• What is the interest rate?

• How quickly do I have to repay the loan?

• Can my bonuses be applied to the payment of the loan?

• What is the effect of my loan on the surrender value or maturity or death benefit?

15. What is the difference between the Term Life Assurance and Permanent Assurance?

Term Life Assurance provides protection for a specific period of time, and pays benefits only if you die and/or become disabled during the time in which your policy is in force. Permanent assurance provides lifelong benefits as long as you continue to pay your premiums.

 

Term assurance coverage, however, ends at the completion of the term, and since premiums increase periodically, may become too expensive to continue. The premiums for Permanent assurance remain constant for the rest of your life. Permanent insurance also builds cash-surrender values, while term insurance does not.

16. What are “Real-Life-Stories” that justify purchase of life assurance cover?

• Final Dignities - A terminal and critical illnesses like cancer can take away ones dignity. A man diagnosed with a terminal illness with an appropriate insurance cover will receive death benefits in advance to live the remainder of his life comfortably and take advantage of the time he has.

• Easing a Tragedy of a Widow - The value of insurance after a tragic car accident that takes the lives of her husband (and oldest even a son) can leave a widow devastated. Life Assurance death proceeds will ease this tragedy.

• Keeping a roof over their heads and Renewing hope for life - A surviving mother with a terminal disease ensures that finances for her remaining family are secure. Her husband’s unexpected death does not cause her unending financial grief.

• Preserving a legacy – Accelerated benefits from a life assurance policy provides steady income for a family and help pay costly medical bills and will enable a dying a man to fulfil his life’s greatest dream.

• Making a difference and easing a family tragedy - Through maintaining a safety net and carefully investing the life insurance proceeds to enable survivors to maintain the standard of living without acquiring debt.

• Health Insurance at a small price – Health insurance helps a woman overcome a costly heart transplant, giving her new hope for the future and A small price indeed for, say, a child and/or whole family’s need for medical care.