Health Insurance = Life Insurance ?

In my course of work, I have often come across clients who claim they have insurance. It is the first intuitive response of most people to say this when they meet an adviser. When probed more closely, it is often not surprising to find that most do not have an idea of what they are covered for.

One of the most common misconceptions people have is to think that life insurance will cover hospital bills. Yes it is possible to use some of the money one receives from a life insurance claim to pay for your hospital bills but what happens if one should admit into the hospital and does not qualify for a life insurance claim?

This is a recent case I dealt with. Mr Q had always thought he had himself covered for hospital bills as he had clearly instructed his agent to prepare a policy to cover this aspect besides his normal life insurance. Mr Q deserves praise for taking active steps to ensure he is protected against hospitalisation risk.

However, it turns out Mr Q only had two life insurance policies in the end. One of the policies had a small sum of medical reimbursement of $5,000. In today's day and age, $5,000 can hardly be considered sufficient for a surgery.

This meant that unless Mr Q should pass on or be struck with total and permanent disability or one of the 30 critical illnesses, Mr Q would NOT be able to claim hospital expenses. The only exception was if he met with an accident which would pay $5,000 from the medical reimbursement aspect.

There are many types of insurance meant for different purposes. Health insurance is meant specifically to provide for medical bills while life insurance is meant to provide for sudden loss of income, legacy and other monetary requirements in event of unfortunate circumstances.

It is greatly advisable for one to ensure that one has not only sufficient, but also the RIGHT insurance to avoid any rude shocks when one should need protection the most.

What is Whole Life Insurance?

Whole Life Insurance is a form of permanent insurance that covers one for his or her entire life or up to a certain age such as 99 or 100. The expression "Whole Life" may not necessarily refer to the period that payments (known as premiums in insurance terminology) are paid. It refers to the period of which the insured is protected.

A whole life insurance policy will usually cover a person against death. As long as premiums are paid, the death benefit will go to his or her beneficiaries. In the case of a whole life policy which tends to be participating in nature, the policy will tend to accumulate value in the form of bonuses over time. This means one will be able to receive a greater payout than the original sum assured. In the event that a policy covers against total and permanent disability, the sum assured will also be activated should the insured meet with such an occurrence.

Because a whole life policy is usually participating in nature, the policy also tends to have a cash value which gives the owner the choice of taking policy loans, converting the policy to a paid up policy and getting some money back if one chooses to surrender the policy after a period of time. It is generally not recommended to do so as one would lose coverage and may not get back an amount which commensurates to what was paid to the policy.

As the policy is able to grow in value, the premiums will tend to be higher compared to a term policy and may be made in regular payments or in a lump sum (known as single premium insurance).

Common features of Whole Life Insurance:

• Protects against death and/or total permanent disability for life or up to an advanced age.
• Accumulates bonuses which add on to the basic sum assured for greater death benefit (for participating policies)
• Has cash value which is indicative of how much one would get should one decide to surrender the policy (for participating policies)
• Premiums will tend to be higher than that of a normal term policy.
• May have policy loan and non-forfeiture options.