Insurance, a familiar financial product, requires thorough understanding and consideration. In South Korea, insurance is one of the most well-known financial products, with 97% of households having a history of insurance coverage in 2017, solidifying its position as a crucial financial product in our lives.
To ensure you make informed decisions, here are six checkpoints you should be aware of when signing up for insurance:
1. Clarify Your Insurance Objectives
Insurance products can be broadly categorized into 'Guaranteed Insurance' focused on risk protection and 'Savings Insurance' designed for accumulating funds for retirement or future needs. Consider the pros and cons of each product type, assess your insurance needs, and make an informed decision based on your financial situation and objectives.
2. Choose the Premium Calculation Method
Insurance products can have two premium calculation methods: 'Renewable' and 'Non-renewable.' Renewable policies have initially lower premiums but can increase over time due to risk factors and age. Non-renewable policies maintain a fixed premium throughout the contract period. Carefully choose the method that suits your financial capabilities and long-term plans.
3. Assess Your Ability to Sustain the Contract
Unlike short-term investment products, insurance products are meant for long-term commitments. Consider your income and ability to pay insurance premiums consistently throughout the contract period to avoid policy lapses or cancellations.
4. Verify the Insurance Company's Reputation
Prevent potential issues from incomplete sales practices by checking the insurance company's 'Incomplete Sales Rate.' This rate indicates the percentage of contracts terminated or invalidated due to the company's incomplete sales process. It's also essential to verify the 'Claims Rejection Rate,' which shows the percentage of claims that the company did not pay for various reasons.
5. Thoroughly Understand Coverage and Limitations
Carefully review the insurance policy terms to understand the coverage and limitations. Many misunderstandings arise when individuals sign up for insurance without fully comprehending what they are entitled to. Utilize consumer-friendly summaries or consult with agents for better clarity.
6. Familiarize Yourself with Your Rights as a Policyholder
As a policyholder, you have specific rights such as the 'Right to Withdraw the Contract,' 'Right to Receive Benefits Even After Withdrawal,' 'Right to Quality Guarantee Termination,' and 'Right to Resurrect the Original Contract.' Familiarize yourself with these rights to make informed decisions about your insurance policies.
By following these six checkpoints, you can ensure a more informed and secure insurance journey, matching your financial goals and needs effectively.