How I see an "Insurance"...

The General Perception

Last Sunday, I was having a casual chat with one of my buddy from secondary school. When I was sharing with him about my savings for retirement with an insurance company, he suddenly felt so upset and condemn the insurance he bought (and just got cancelled). Of course I am quite shocked and asked further to find out why, as I am also a client for the insurance company.

He told me that it is not worth at all the be bonded for so many years for the small returns and he quoted that he is paying for about RM50k per year. He paid for a couple of years and when he cancelled the policy, he only get back peanuts. He said to me, what they (the agent whom sold to him I guess) have promised him is not what he is getting. He suggest that it is much more better to put the money with Public Mutual and to buy properties, much greater appreciation in terms of value.


At this point of time, I did agreed with him that it is better to buy properties and other type of investment such as in funds, gold or even the share market. However, what was the main purpose at the time when we decided to sign up for an "Insurance" policy? The general perception of insurance have been twisted or perhaps, changed because many believes that it is much more difficult to sell an insurance than an investment product. Hence, agents or service providers would want the faster and easier way to approach and get the sales but telling people that it is a better way to start saving with an insurance company which gives better returns.

Majority of us would perceived the message like "Better return" & "Savings" to be the pulling force to sign up, knowing that it is an alternative to fixed deposits or another form of investment. Now, this is the beginning of confusion and/or deviated purposes.

The Purpose of Insurance

I always ask myself, what does insurance means and why we have to pay now for so many years later to enjoy the fruits of it. I started to realize that I should not be asking this question at all because insurance is something that we should not be looking forward to utilize it and to enjoy the fruits. It is suppose to be something that helps us to minimize our losses or provide the basic necessity when we have problem to fulfill our needs.

Here comes the question of "what is your needs and wants?" As many has defined needs as the necessity for us to survive and whats are the desire for us to achieve to that we can have a different lifestyle. If you perceive the insurance as a source of income or an investment that can change your lifestyle (be more luxury), then you are seeing the insurance as "wants". Nothing wrong about that but with such perception of insurance, we may end up paying more premiums (which is good) or not buying any of it (which you don't belief in it). In both scenario, it would end up to be disappointing because 1) you will always feel like paying a lot of money but can't see any immediate return, you will start to feel frustrated and may withdraw even before it reaches the end of the terms. 2) You may end up with more losses, more expenses and in financial difficulties if you fall sick with certain chronic illness (also maybe an accident that causes permanent disability).

Of course, many may think that the 2nd incident has the least chance to happen in life. I cannot say that this thinking is wrong neither because some people can really live up their entire life without such issue. But for me, I don't think I can be so lucky :)

From the above, we can see that the purpose of insurance has been deviated to a money making component in our life but in actual fact, it is not. Like I have mentioned earlier, it is suppose to be the opposite of maximizing profits, but to minimizes losses.

With sufficient insurance, you can get enough coverage and sustain your current lifestyle even when something happen that causes you not be able to generate income anymore (such as accidents, illness or retirement). Meanwhile, it is also acting as an income generator for your family if you are no longer in this world to earn for the family.

Get it right!

You may not agree with me but this is how I see the importance of having sufficient protection from the insurance. That is why people buy an insurance while playing blackjack in casino. It is not to win more money, but to "MINIMIZE LOSSES"!