4 Risks of Delaying Having Insurance You Need to Know!

Queenews.com- The occurrence of the COVID-19 pandemic, which has claimed many lives and caused a downturn in the global economy, has more or less encouraged an increase in awareness of the importance of insurance. Since the pandemic hit, Indonesian people’s awareness of having insurance has increased.

The Manulife Asia Care survey last November 2020 showed that in the Asian region there has been an increase in interest in buying new insurance products, from 62% to 71%, since the last survey in May 2020. Three money equal, data from the Financial Services Authority (OJK) as quoted by Investors Daily in July 2021 also showed that Life Insurance Premiums during semester I-2021 experienced an 18.35% growth compared to the same period in 2020.

Apart from this growth, public awareness of having insurance still needs to be encouraged. This is because the level of insurance ownership or penetration is still low in the country. According to the OJK, as quoted by Bisnis Indonesia, the insurance penetration rate in June 2021 only reached 3.11%.

Many people may already understand the importance of having insurance to manage their financial risks. However, many are still unsure or choose to delay having it. In fact, the longer we delay having insurance, it’s the same as letting risks occur to finances and the future.

Some Risks of Delaying Insurance Losses

Many cases occur when someone is just thinking about buying insurance when the thing they are afraid of has already happened before their eyes. If this is the case, of course it is difficult to find insurance that is willing to bear the risk of such losses.

So, so that you can make sure that you decide on insurance, let’s take a look at the 4 disadvantages that we will experience if we delay having insurance:

  1. Premium Prices Get Higher With Age

To be able to get insurance protection, we are required to pay a premium to the insurance company that acts as the risk bearer. The premium amount is determined based on the Insured’s risk analysis. Some of the things that become risk assessment variables include the age of the insured and health condition. The older the insured is, generally the insurance premium will be higher because it is considered that the risk is greater than the younger insured. Likewise regarding health conditions that can be seen based on medical records, the lifestyle of the Insured whether smoking or not, and so on.

The age variable also determines the premium in long-term insurance policies such as life insurance. For example, we buy life insurance at the age of 29 with a sum insured of IDR 1.1 billion and a protection period of 20 years. So for the next 20 years, we will be charged a premium per year, let’s say it is around IDR 3.08 million. Conversely, if we apply for life insurance at the age of 35 with a similar coverage and protection period, we can be sure that the premium charged will also be higher.

One of the term life insurance products that we can consider is Term Saving Protection from Manulife. This product provides a death benefit in the form of 100% UP which is given if the insured dies during the coverage period. In addition, Term Saving Protection also provides benefits in the form of 200% UP if the insured dies due to an accident. There is also a final contract benefit in the form of 100% premium return if the insured survives to the end of the coverage period.

  1. Poorly Managed Finances

Insurance is actually a mechanism for diverting or transferring risk from us to insurance companies. As a risk transfer service, insurance companies get premium income paid by policy owners. By having insurance, we limit the risk of loss to a certain number that is more certain. An easy example, we buy health insurance that has a yearly limit or a maximum annual benefit limit of IDR 200 million.

To get the insurance benefits, we have to pay a premium of IDR 1 million per month. Thus, we limit the risk of spending due to illness to a maximum of IDR 12 million per year to get benefits worth IDR 200 million. So, if one day we need treatment costs that cost up to Rp. 100 million, the insurance will pay for it.

The opposite will apply if we don’t have insurance at all. With the same case, namely an illness that costs up to IDR 100 million, we have to pay 100% of the expenses ourselves. So, let’s get insurance right away so we can manage the risk of loss that can interfere with financial health.

  1. Opening the Risk of Trapping Expensive Debt

Insurance is very useful to help us anticipate events that require large funds. Illness events that require the best medical care, accidents that eliminate the ability to work, to death that stops the supplyr income for the family left behind, and so on. If we have insurance, these risks are transferred to the insurance company (or shared if the context is sharia insurance products). By shifting the risk, we do not bear it alone. If you have an illness, like the example above, you don’t need to pay up to IDR 100 million for treatment out of your own pocket because the insurance will cover it.

What happens if you don’t have insurance? So, how does it turn out if someone’s finances are not able to bear the cost itself? There are many cases like this that end up dragging someone into a high-cost debt trap. When personal finances can’t afford it, people often turn to seeking debt so they can still get the care they need. The problem is, in urgent conditions such as illness, the need for funds is also required to be quickly available. Finally, many are also forced to owe expensive loans because they can be obtained quickly.

If that’s the case, personal financial conditions can be even more complicated. Taking on high-cost debt if not calculated carefully, risks dragging our finances into complicated problems and even bankruptcy.

  1. Not Optimal Investment Made

Investing is one of the right ways to increase asset value and help achieve certain financial goals. Investments can provide returns that help accumulate wealth more quickly. Along with that, the investment also has a risk that is proportional to the opportunity for profit. When we invest without having any insurance protection, it multiplies the risk.

The picture goes like this. We routinely invest in mutual funds or stocks for a financial goal, amounting to IDR 2 million per month. Well, one day there was an illness where we needed a large amount of treatment costs. Because you don’t have health insurance, your income and savings are drained to cover hospital costs. As a result, the allocation of routine investment funds of Rp. 2 million per month is also sucked up by hospital costs. As a result, financial goals are threatened with failure because there is no investment capital.

The opposite happens when there is insurance, when there is an illness, it is the insurance that will cover the cost of treatment so that we can still allocate a routine investment fund of IDR 2 million. That way, financial goals don’t need to be disturbed by unexpected expenses because there is insurance to cover them.

By understanding the four risks of delaying insurance, there seems to be no reason for us to ignore it. Come on, immediately complete your protection needs by having the right insurance!

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