Life insurance is like planting a tree

The timeless wisdom of the famous Chinese philosopher Confucius resonates profoundly in various aspects of life, including the realm of life insurance. His adage, “If your plan is for 1 year, plant rice. If for 10 years, plant trees, and if your plan is for 100 years, educate children”, encapsulates the essence of long-term planning, akin to the nature of life insurance - a financial shelter extending across decades, much like nurturing a tree from sapling to maturity.

Life insurance, particularly investment-linked plans that are overwhelmingly sold in Pakistan, demands consistent nurturing in the form of regular premium payments to sustain its value over time. Failure to do so may result in a diminished or exhausted policy, rendering it incapable of fulfilling its intended purpose.

On the occasion of Insurance Day, it is imperative to enlighten people about the crucial aspects of life insurance to safeguard their financial future:

Commitment to long-term vision: Embrace life insurance as a long-term commitment aligned with your evolving needs. Acquire coverage at an early stage, ideally before the age of 55, to secure lower premiums and mitigate the risk of unforeseen health complications impeding eligibility later in life.

Prudent premium selection: Exercise prudence in selecting a premium amount according to your regular income and saving capacity. Anticipate future income growth and the consequent need for additional coverage, supplementing existing policies rather than replacing them.

Preservation of existing policies: Resist the temptation to surrender older policies unless pressed by dire circumstances. Like a growing tree yielding ripe fruit over time, older policies often offer enhanced benefits and quicker claims settlements, underscoring the value of persistency.

Holistic financial protection: Acknowledge the multifaceted nature of life insurance beyond mere investment, encompassing provisions for death, disability, and critical illness coverage alongside avenues for disciplined savings.

Understanding premium allocation: Grasp the intricate distribution of premiums, which is divided into three parts for risk coverage, insurer expenses, and policyholder investments. Only the last component is receivable to you during your life as cash value.

Timely premium payment: Adhere diligently to premium payment schedules, leveraging the grace period given by insurance companies to accommodate unforeseen delays. Ensure prompt payment through secure channels, such as direct visits to company offices or crossed cheque payments mentioning policy details.

Study policy document thoroughly: Study the original policy document meticulously, familiarising yourself with rights, responsibilities, and coverage parameters. Comprehend the spectrum of covered events and supplementary riders. If needed, seek professional guidance or insurer assistance for clarity or any alteration.

Secure policy document: Safeguard the original policy document in an accessible and secure place, apprising nominated beneficiaries of its location and significance in facilitating claims processing.

Commitment to disclose facts: Uphold the principle of utmost good faith in disclosing your health and personal information, pivotal in safeguarding claims validity and quick settlement.

Understanding cash value dynamics: Recognise the dynamics of cash value attainment between regular and single premium plans, with the former typically attained after two payments of yearly premiums, whereas the latter at the outset. Understand the evolving nature of cash values, which are lower than the paid premium in earlier years but enhance over time to yield returns in later stages.

Last but not the least: Remember, life insurance is good for life, and any person having life and earning needs it.

Director, Operations & Legal, Adamjee Life & Vice Chairman IAP