3 Things to Understand When Buying Unit Link Life Insurance

Combining the function of protection and investment potential, unit linkd life insurance has become the target of many people. On the one hand, you as the Insured still get protection against personal risks. Then, on the other hand, unit-linked life insurance also functions as an investment product that will have the potential to increase your assets even though it is still accompanied by market risk.

Not surprisingly, based on data from the AAJI Life Insurance Industry Q3 Performance Report, the contribution of unit-linked life insurance premiums to the total premium was recorded at 62.5% or Rp93.31 trillion. This shows that unit-linked life insurance products are quite a favorite choice in the community.

Even so, several things must be considered before you choose this type of insurance. Anything? Check out the explanation below!

Double benefits of unit link life insurance

Unit-linked life insurance provides multiple benefits for you and your family. One of the main benefits is to protect yourself from various forms of risk that may be faced in the future. For example, the head of the household dies or experiences other risks that result in loss of livelihood. This is where the protection benefits of unit-linked life insurance will work, namely by paying benefits in the form of sum assured if certain risks occur as stated in the policy.

The sum assured is of course obtained from the payment of your premiums/contributions so far. Well, in unit-linked life insurance, some of the premiums/contributions paid also go to your chosen investment instrument. The premium/contribution payment will later generate a cash value which is the result of investing in unit-linked life insurance. That is the reason why unit-linked life insurance has another function, namely as a potential investment.

Unit-linked life insurance also has risks

Given that unit-linked life insurance also offers investment benefits, there are risks that you need to be aware of. This means that there is a possibility that the potential return on your investment in unit-linked life insurance may increase or decrease because it fluctuates with the market. It should be understood that investment returns may not match the illustration of life insurance at the beginning and are not used as a benchmark for future investment results.

 

How does unit link life insurance work?

Another thing to consider before choosing unit link life insurance is how it works. Simply put, the initial premium/contribution paid by the Policyholder will be divided into several parts. Not only for investment costs, but also administrative costs, acquisition costs, and other costs. Some of the premiums/contributions are also allocated to investment instruments which can later generate potential investment returns.

Well, considering that premiums/contributions are allocated to several expense items, you shouldn’t expect big profits in the first years. The purpose of unit-linked life insurance is to achieve long-term financial goals and not just for profit.

So make sure to choose a unit link life insurance product that fits your needs and abilities, OK!

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