Protection benefits as well as cash value
KONTAN.CO.ID – BDeposit rates are increasingly unattractive. Ah, you may have felt and experienced it.
Yes, day by day, the deposit interest is growing. Currently, the average 12-month deposit interest rate is only around 5.9%.
In some banks, the interest is even much smaller, below 5%. This does not take into account the 20% discount of income tax (PPh) on deposit interest.
Put it said, you earn 5% interest. After deducting the tax, you will receive only 4% interest.
Obviously, this isn’t profitable enough. In fact, to simply beat the inflation rate of nearly 4%, the profit from deposit interest is no longer sufficient.
Of course, you can actually find alternatives to other investment instruments. It’s not difficult, really, to find an investment instrument that can beat deposit yields.
You can choose: there are mutual funds, bonds, or investing in the stock market. However, some of you may worry that instead of growing, investment funds will actually shrink because market conditions are not as expected.
Hence, for some depositors, there is nothing wrong with the lower deposit interest rate. As long as the money continues to grow. In fact, customers with such a conservative risk profile can still target other investment instruments that provide guaranteed returns.
In fact, this alternative instrument you may not have thought before. This investment alternative is arguably not an investment instrument.
Because, these instruments are more accurately called protection instruments. Yes, what is meant is an insurance product.
However, not unitlink, lo. You see, unitlink does not guarantee the amount of return.
Some of you may already be familiar with end-to-end insurance products endowment. Indeed, this product is less popular than unitlink.
Because of that, some others may wonder, what the heck is dual insurance.
As a protection product, endowment insurance is an instrument that provides life insurance protection for customers. Interestingly, as the name implies, endowment insurance provides multiple benefits.
In addition to protection against the risk of death like other traditional life insurance, endowment insurance also provides cash value benefits if the insured is still alive until the end of the contract period. “Some money is returned like deposits,” said Geger N. Maulana, Acting Director of BNI Life.
Simply put, Director of Indolife Pensiontama, Juli Priyatno, said that dual-purpose insurance provides protection as well as savings or investment during the insurance coverage period. If the insured dies, the heirs will receive the sum insured.
Well, if you don’t experience the risk of death until the insurance period is over, the insured will get a certain amount of cash. In essence, the Managing Director of WanaArtha Life Yanes Y. Matulatuwa stated, endowment insurance combines pure life insurance with investment.
Attractive yield
Interestingly, the cash value that the insured receives when the insurance contract is completed is quite tempting. In fact, if calculated as a percentage, the cash value of endowment insurance can provide more attractive returns compared to deposits.
What is even more interesting is that the returns that customers get are also tax free.
In addition, Juli said, the investment benefits that will be obtained by customers have been determined at the beginning of the contract. This means that when buying a dual-purpose insurance product, the customer already knows exactly how much return he will receive when the policy is due.
So, Geger added, apart from being a need for protection, endowment insurance can be used to cover future funding needs. This is what makes endowment as an alternative to savings outside of deposits.
In addition, in times of low bank interest rates, endowment insurance becomes more attractive. “It could be a short-term investment alternative,” said President Director of Capital Life Antony Japari.
Even though it provides greater protection and returns than deposits, endowment insurance also carries risks. If you withdraw the policy before it’s due, you will be penalized. The amount of course depends on each insurance company.
So, how attractive is the cash value offer for endowed insurance products? Then, what are the benefits that you can get as a customer?
Check out some of the following product offerings:
Capital Life has a dual-purpose insurance product called Capital Proteksi Plus which has been launched since late 2015. This one-year term product applies premium singles aka premium paid at once. Products are marketed through bancassurance, Bank Capital.
According to Antony, to buy this product, the minimum premium is IDR 250 million and a maximum of IDR 10 billion. Capital Proteksi Plus provides benefits if there is a risk of death due to an accident.
The sum insured is 150% of the premium up to a maximum of IDR 2 billion. This means that if the premium is IDR 250 million, the sum insured the heirs will receive is IDR 375 million. The heirs will still receive a proportional investment development result.
If there is no risk until one year, aka the contract is complete, the insured will get back the premium plus the investment return. Currently, Capital Proteksi Plus offers a yield of 8% a year. This is net, huh.
You can take the results of this investment development every six months.
Oh, yes, if you withdraw the policy before maturity, you will be subject to a penalty in addition to not getting any investment development results. The amount of the penalty is 5% of the premium you pay.
WanaArtha Life has a multipurpose product called Wal Invest which has been marketed since 2008. Product premium single it has a term of five years.
Yanes said that Wal Invest has set a minimum premium of Rp. 100 million to be paid at once. If there is a risk of dying from an accident, the heirs will receive a maximum sum insured of IDR 2 billion. If there is no risk, the customer will receive a cash value according to the insurance period.
According to Yanes, the yield on cash value that Wal Invest offers varies, ranging from 6.25% -8.5% per year. This rate of return depends on the amount of premium and company policy. What is clear, the results of the development of funds can be taken by the customer periodically.
Indolife Pensiontama’s flagship product, StudySave, has been sold for more than 20 years. This five-year product has a minimum premium of IDR 25 million, which is paid at once.
Juli explained, when the insured is at risk of dying from an accident, the heirs will receive a sum insured amounting to a premium paid with a maximum of Rp. 500 million.
Meanwhile, if until the end of the contract there is no risk, the customer will receive a cash value in the form of a premium plus investment returns. Currently, StudySave offers a yield of 7.5% per year. This yield is valid for the next five years if the customer purchases the current StudySave product.
In the market for combination products between protection and investment, BNI Life relies on products that carry the name Hy End Pro. The product, which has been launched since 2015, is actually a hybrid product between dual-use and unit-linked.
The minimum premium is quite affordable. Geger said, you can buy this product with a minimum premium of IDR 10 million. If there is a risk of death, the heirs will receive a sum insured of 150% of the total premium.
Well, the premium you pay will be divided in half. 20% will be placed in stock instruments. Meanwhile, 80% was placed as a protection instrument.
When the contract ends in the third year there is no risk, you will get 80% of the fund back to 100%. Put the word, you paid a premium of Rp. 100 million. A total of Rp 80 million was placed as an instrument of protection.
At the end of the contract, you will get IDR 100 million back. This does not include the return on investment from the 20% fund in stock instruments.
Without including the return on stock investment, you can get a return of 25% in a year. This is assuming 80% of the funds return to 100%. What is clear, Geger said, is that the yield on Hy End Pro is more than 10% within three years.
If the policy is withdrawn before three years, you will be penalized. Withdrawals under one year, can be subject to a 10% penalty.
How, quite attractive is not a double offer of endowment insurance? So, there’s nothing wrong with starting to glance at and considering the right product as a substitute for deposits.