In buying insurance products, of course we want to protect ourselves and loved ones too, such as family. Moreover, if we become the backbone of the family. The reason is, no one knows when we die or experience an event that causes us to no longer be able to work to earn a living, for example due to serious illness or disability due to an accident.
Protection for the closest people or heirs when we are no longer able to earn a living can be in the form of insurance coverage which will be provided with predetermined conditions and conditions.
Definition of Insurance Sum Insured
Sum assured in the world of insurance means the form of responsibility of the insurer or insurance company in the event of a risk to the insured party to the bereaved family or to the heirs.
The heirs will get the sum assured which can be used as living expenses after the insured dies or is unable to work again due to serious illness or permanent disability.
Types of Insurance That Provide Sum Assured
Not all insurance products provide sum assured as there is a separate form of benefit obtained by the insured. The following are insurance products that specifically provide coverage in the form of cash.
1. Life insurance
Life insurance provides a sum insured if the insured dies for any reason. In some clauses, suicide can be included as a covered risk, but there are terms and conditions that apply and not all insurance companies offer it.
2. Accident insurance
Accident insurance provides sum assured if the insured experiences death or total permanent disability caused by an accident. The sum insured from accident insurance can only be disbursed due to the impact of an accident, not with other risks.
3. Critical illness insurance
Insurance claims in the form of sum assured can be issued and added to the waiver of insurance premium payments until the age specified in the insurance policy in the event that the insured is medically diagnosed with a critical illness at a certain stage which is covered under insurance coverage.
Before Determining the Sum Insured, Check This First
We as customers or the insured can adjust the amount of the sum insured to be given to the family or heirs. This will affect the amount of insurance premiums that must be paid.
Well, before determining the value of the sum assured as needed, prospective insurance customers should have thought about the following things.
1. Economic value
Economic value is the value where our income for a year is calculated on average every month. For an employee, the economic value is the amount of net salary received or take home pay. Regarding the sum assured, it is highly recommended to look at the existing economic value, so it is not just a matter of salary adequacy.
2. The existence of individuals other than the insured
Prospective policyholders should consider the people who depend on the economic value. The people in question are wives, husbands, children, brothers, sisters, or parents who have retired.
3. Funds related to other parties in business activities
For example, individual loans outside of bank loans or other financing that are not covered by life insurance.
Insurance Sum Insured Calculation Method
In order to get the maximum possible coverage benefits in time, there are three methods of calculating insurance coverage that are ideal and profitable for us.
1. Human life values
Simply put, in this method, the sum assured is absolutely calculated based on monthly income multiplied by the duration of the funds available to support the necessities of life, regardless of the interest factor or the growth of funds if the insured money is stored in banking products.
2. Income based value
This method calculates the sum assured by entering the amount of interest or return if the sum assured received is stored in banking products.
3. Financial needs based value
In this method, the amount of the sum insured is taken from a range value which is at least equal to the nominal amount of certain needs at this time or is called the present value . This amount is multiplied by 150 percent.
Meanwhile, the maximum sum insured is the amount of money in the future or referred to as future value . This value is multiplied by 80 percent.
Financial needs based value combined with investment products that are applied monthly or annually in order to achieve future financial needs from the financial needs they have. This condition is also known as future value .
The financial needs based value method can also be used for people who have a higher monthly income. The other two methods may not be used for those with higher incomes because they will give the sum insured which is considered too large. In practice, the sum insured is too large to minimize the chances of being approved by the insurance company.
Those are some definitions and types of sum assured in insurance. Hopefully this information can be useful for those of you who are looking for insurance information and the sum assured.
