Many people already understand the importance of having insurance to support healthy personal finances. However, this awareness has not been followed by the ownership of insurance in accordance with the needs of the family. This can be seen from the still small ratio of the amount of funds in the insurance industry to gross domestic product (GDP) or the insurance penetration rate.
The Financial Services Authority (OJK) noted that until 2020, the penetration of the insurance industry in Indonesia is still below 4%, below Singapore, which is already in the 6%-7% range. Even for life insurance products, the penetration rate is getting smaller at only 1.1% because it was affected by the COVID-19 pandemic which triggered an economic recession.
Often doubts about having personal insurance are caused by confusion about where to start in completing the protection needs. If you are currently still in the stage of considering buying insurance as needed, you should not delay it anymore.
Insurance is one of the main foundations of a healthy finance. Delaying insurance can trigger financial exposure to risk of loss that you can actually manage and minimize.
Why Need Insurance?
Often people delay insurance because they feel they have sufficient savings to anticipate an emergency that requires financial support. But, how sufficient is the cash savings to cover large unexpected expenses, such as during a sudden illness?
Cash as an emergency fund is very important. However, its value is relatively limited. For example, if you are married and have children, the recommended emergency fund is at least 6-12 times the value of your regular monthly expenses. There is limited value in this. For example, you have an emergency fund of IDR 70 million, which is equivalent to 7 times the value of your monthly expenses. When an unexpected event occurs where the main breadwinner of the family dies for good, will the funds be sufficient to provide for the life of the family left behind?
Emergency funds have nominal limitations. The emergency fund plays more of a role as a security blanket to support the fulfillment of emergency needs only. However, to help you anticipate greater unexpected financial needs, it takes more than just an emergency fund. Insurance can be the main safety net that plays a role in protecting your finances from greater financial risks.
An easy example, a family breadwinner has term life insurance with a Sum Assured (UP) of IDR 1 billion and for that he only needs to pay a relatively small premium. When the main breadwinner suddenly dies, the Sum Assured (UP) can be disbursed and become provisions for the life of the family left behind.
Likewise with health insurance. For example, a person pays a monthly premium of a certain amount of rupiah to get health protection with an annual benefit value of Rp. 200 million. When he falls ill that requires treatment costs, he does not need to spend money for these purposes because the insurance covers it. So with insurance, the risks of large financial expenditures can be more manageable.
Life Insurance and Health Insurance, Two Important Protections
There are many financial risks that can occur and disrupt a person's financial stability. Starting from a car that suddenly broke down and needed repairs, a house that suddenly flooded unexpectedly, to the incident of a family member getting sick and the worst, the death of the breadwinner of the family. Which of these financial risks should be a priority to be managed?
As an important step in building healthy personal finances, you should focus on the two main insurances that need to be met, namely health insurance and life insurance.
1. Health Insurance
Health costs are getting more expensive from year to year. A survey conducted by Willis Towers Watson, a global risk management consulting firm, revealed that the average increase in health costs in various countries in the last 3 years, namely the 2017-2019 period, reached 10-11% per year.
As an illustration is the cost of hospitalization in the hospital. About 10 years ago, for just IDR 600,000 per night you could get a private treatment room with one bedroom. Nowadays, it's hard to get a one bedroom treatment room at that much cost.
That is, the increase in the cost of medical care is a fact that is difficult to ignore. As an anticipatory measure and for peace of mind, you can take advantage of health insurance as protection for health costs. That way, you don't have to worry about whether the savings you have are sufficient to cover rising medical costs in the future.
Not only that, with personal health insurance, you can access health services more quickly and comfortably. Almost all current health insurance uses a cashless system, so you just need to show your insurance card when you visit a health facility and get the treatment you need right away. No need to prepare cash in advance for expenses.
For health insurance, you can consider MiUltimate HealthCare from Manulife Indonesia. This best health insurance has several advantages:
- First, reimbursement of hospital costs according to the bill. With this feature, you don't need to prepare any funds to cover medical costs because the insurance will pay for it as long as the annual limit has not been exceeded.
- Second, the benefits of 1 or 2 bed inpatient rooms in the hospital.
- Third, the cost of rooms abroad. This health insurance provides benefits for hospitalization costs up to 3 times the plan you choose if you are hospitalized abroad.
- Fourth, there is an additional annual benefit limit feature if you as the insured suffer from a critical illness such as cancer, kidney failure and so on.
2. Life Insurance
Life insurance is a sign of your love for your loved ones. On a day-to-day basis, you may play the role of the breadwinner of the family where the well-being of your family and children depends a lot on your existence. What would happen if you as the breadwinner of the family suddenly died? Families who have been financially dependent on you will not only experience the loss of their beloved figure but will also face financial challenges as the income that has been used to cover their daily needs has stopped.
You can minimize this incident by having life insurance. Life insurance protects your economic value as the breadwinner. So, when one day you die, the income that is the foundation of the family does not just stop. The reason is, insurance will disburse a sum of Sum Insured (UP) which can be used by the bereaved family to continue living.
There are many life insurance options that you can choose according to your needs. Manulife Indonesia has several life insurance products ranging from term life insurance such as Term Saving Protection. There is also life insurance that provides maximum protection, such as Manulife Essential Assurance, and life insurance in accordance with sharia principles that provides protection as well as investment such as MiSmart Insurance Solution Syariah (MiSSION Syariah).
With the right health insurance and life insurance, you can achieve a more stable and prosperous finances. So, let's have insurance.