Ricky Batten

Life insurance for savings or family protection

A detailed look at what life insurance is all about

Many, many years ago, life insurance companies attempted to invade the Land of Smiles by offering Thais guaranteed financial protection for their loved ones. But the inhabitants of LOS repulsed them and drove them away. What these invaders didn't realize was that the inhabitants of the Land of Smiles had no interest in, nor need for, purchasing guaranteed financial protection for their loved ones. Their culture already provided that protection through large close-nit extended families, thus, pretty much dooming any effort to sell life insurance in Thailand.

Eventually, just after the end of WW2, a small and little known (at that time) American insurance company arrived on the scene from China. They had been very successful there selling life insurance to the Chinese before the Communists took over China and tossed them out.

Quite similar to the Thais in their philosophy of family, the Chinese also had had absolutely no interest in buying life insurance to provide financial security for their family; but still, they purchased a lot of life insurance. After arriving here, they quickly proceeded to conquer Thai hearts and minds, just as they had done with the Chinese, by offering them various forms of savings programs, packaged as life insurance, that allowed them to build up cash for financial needs in 10 or 20 years, at age 65, for their child's college education, etc. This form of life insurance is actually a "savings endowment.". It protects the saver's savings program by continuing it if the saver gets disabled and can't continue the monthly "deposits" or, if the saver dies, completes the savings program and pays the money to a designated loved-one.

This concept of life insurance conquered the hearts of the Thai people and even won over the Thai government, which now rewards buyers with a tax deduction for the purchase of Thai baht life insurance. They do this to encourage Thais to accumulate savings. And now, everyone has a friend or a relative who is selling for this life insurance company. Plus, there are about 25 other life insurance companies now selling life insurance in Thailand using the same approach.

Meanwhile, many years later back in the USA, I went to work selling "family plan" life insurance policies to young families. I sold for a company that was "as solid as the Rock of Gibraltar." As I got to understand life insurance more, though, I decided to seek out a life insurance product that would appeal to the more sophisticated, upscale life insurance buyers. I focused my search on finding the lowest cost whole-life insurance policy available in America, providing the highest amount of coverage for the lowest premium. Then, I got myself approved to sell this highly respected life insurance to my clients..

Age and gender are two of the more important factors in helping to determine a life insurance premium. Gender is important because women tend to live longer than men. Age is important because every year you live; you come that much closer to dying. In fact, no matter how young or old you are this year, many people your age will not live to see another year. Life insurance companies know this and use mathematicians (Actuaries) to mathematically calculate your risk of dying at any given age.

I strongly believe that life insurance should primarily be purchased to guarantee financial security for loved ones, to cover payment of a debt (house purchase) or guarantee continuation of a business should an owner/partner die unexpectedly. Once these things have been provided for, then you can consider one of the many kinds of savings endowments available for your kids, your wife or yourself. If you don't have a family right now, but are hoping to have one in the future, this is a good time to start preparing by purchasing a good whole-life insurance policy. Every year that you wait, the cost to buy life insurance gets higher. Also, the very nature of the product causes it to build up cash value for future needs.

Actually, there are two totally different types of life insurance policies that I really like. One is Annual Renewable Term Life Insurance; the other is Whole-Life Life Insurance, as mentioned earlier.

Annual Renewable Term is pure death protection. The premium that you pay each year is determined by your age that year. The renewal premium goes up every year in accordance with your age that year. Since you are just paying the actual cost for your age that year, Annual Renewable Term Insurance is, theoretically, the lowest cost life insurance you can buy. It can be an excellent buy if you only need the death protection for just a few years; but we don't know of any insurer here offering it. Eventually, though, Annual Renewable Term becomes much more costly than Whole-life Insurance.

When you first purchase Whole-Life Insurance, the premium is much more costly than for pure Term Life Insurance. But the premium for Term Life Insurance keeps increasing over the years, while the premium for Whole Life Insurance remains constant throughout your life time. Eventually, the premium for Term Life Insurance will far exceed the premium for Whole-Life Insurance.

When you first purchase Whole-Life Insurance you are overpaying in the early years so that you can maintain a reasonably low, level premium in the later years.. This is why life insurance policies build up cash value. They invest the "overcharge" and then return some of it to you in the form of cash build up in the policy. 1) You can borrow on that cash build up in the policy; 2) you can return the policy to the insurance company and receive the cash build up; 3) you can stop paying for the insurance and use the cash build up to convert the policy to reduced paid-up coverage; or 4) you can just stop paying and maintain the full coverage as Term Insurance until the Cash Value runs out.

With this flexibility in mind, if you are purchasing life insurance for the financial protection of loved ones, I recommend that you spread the premium payment period out for as long as possible (to age 90 in Thailand). This way you can get more coverage for less cost until the kids are grown and on their own. Then, you can convert the policy to paid-up coverage or convert the policy to cash for your needs.

Thai baht life insurance is best for expats and their loved ones who are planning to live in Thailand indefinitely.

Also, since this blog is normally a source for health insurance information, I should mention that health insurance riders can also be attached to life insurance policies. But be aware that the amount of medical coverage provided tends to be fairly limited.

For more information on insurance plans in Thailand, please feel free to reach out to Pacific Prime Thailand Insurance Brokers, or email Walter directly at walter@pacificprime.com 


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