Wake Up to Rising Prices

Life insurance is a simple matter.

Just choose the amount of coverage you want. If the unexpected and dreaded event happen, this amount will be enough for your family's needs, just as you wanted.

Wait. Not so quick. There is something else that must be considered here.

Rising price.
or in a term which everyone hate it,
Inflation.

Spurred by soaring fuel and energy prices, the inflation rate has galloped to a 27-year high of 8.5% in month July 2008, as compared with 3.8% in month May.

Because of the high cost of living, most of us have had to tighten our belts. Some of us may even consider cutting back on insurance when, in fact, during inflationary periods, we should actually be thinking about increasing our level of protection. That's because inflation has an effect on insurance coverage, be it life, medical, investment-linked or some other plan you may name about.

Keep Pace with the Rising Cost of Living

I'm sure all of us know that the cost of living today is higher than it used to be. Because of this harsh fact, the value of insurance coverage purchased a long time ago is less today than it used to be. Have your own say bout this? Let us look at this case study closely.

" Soon after his marriage in year 1984, Mr. Andy Examined his personal financial position and he concluded that a life insurance policy worth RM 100K would be sufficient for his family's needs if anything happened to him as a keyman to his family. But over twenty years on, his children have discoverd that the value of the coverage has diminished considerably."

'since the time our father first bought his insurance, prices have gone up for almost everything. Those days, you could eat lunch for under RM 3 but at this time it would easily costs RM 5 or even more. The rental has also spiked up,' said his daugher Mary. 'The money which was paid to us is not going to sustain as long as our father planned for it to be.'

Besides the value of insurance coverage, inflation also erodes the value of savings. Assuming an inflation rate of 6.0% p.a, RM 500k today will have the purchasing power of less than RM 150k from now. That's sobering thought because, if the rate were to remain at present levels, our money would be worth even less.


Start with a Review of Your Protection Options

Because of the rising cost of living, a review of your coverage is timely. It may no longer be sufficient for you and your family to maintain the standard of living that you originally intended. To bridge that gap, you should consider getting additional coverage to offset the effects of inflation- wheter it's with life, medical, retiremetn, education or estate planning, we just need a review on this area of our life.

Nowadasy, most company are promoting 'investment-linked' plan, a plan that offers protection and investment value at the same time to its holder. This trend has come about in our country because of the new rule that Bank Negara is about to implement next year, probably next June, a law known as R.B.C( Risk Based Capital). Under the implementation of RBC, company that would have to offset the amount they guarenteed to policy holder aside, unmoved, the fund that being offset is meant to give capital protection and assurance to policy holder that their guarenteed sum of money is being assured. This new implementation has spurred insurance company to start to venture into promoting investment-linked plan, as invesment-linked plan does not guearentee any capital protection to its policy holder whereas the risk is wholly dependent on the investment portfolio holds by the policy holder.

So at this juncture of time, if we were to do a review on our financial health status, we have to be very meticulous as well. But nevertheless, it is something we cannot escape from, to check on our financial and risk planning from time to time. Because the world that we live in is always changing, in fast pace.