Published on December 19, 2005

Life insurance is not only a good way to protect yourself, it can also be a useful investment tool – and tax-deductible too. The Revenue Department has revealed that in 2004 only 4,874 people, or 0.07 per cent of the nation’s 6,652,069 taxpayers, earned more than Bt10 million.

If you are not one of them, you may need an insurance policy to shepherd you through a future which, euphemistically speaking, is likely to be rather unpredictable.

Most of us are salaried people, reliant upon our monthly incomes, but we tend inevitably to fall short when overtaken by sudden, unexpected incidents, including illnesses in the family.

You should also consider that the maximum Bt50,000 annual life insurance premium for at least a 10-year policy is personal tax-deductible.

Life insurance offerings are basically of four types: whole-life policies, term ones, savings-specific and single premium. Variations within this broad scheme of things are devised to match an insured person’s age, sex and lifestyle.

All policies yield their benefits but you must scrutinise all the relevant details before crucially putting pen to paper. And you will be well advised to remember that the glossier the offer, the greater could be the eventual strain on your purse strings.

However, the pick of the bunch for most of us is the good, old ordinary insurance policy, called a whole-life one in insurance lingo. Both those without any policy and those with one or more will, though, do well to make sure that they get something that suits their needs.

General insurance policies tie policyholders and insurers together in a long-term bond. Once you have signed up, you are obliged to pay your premiums for up to at least 10 years.

Thai Life Insurance, the country’s second-largest enterprise of its kind, has provided details in the accompanying table of the easy premiums charged by it for whole-life policies. Do you wonder why they are much cheaper than what you have been paying?

Well, this is because most policyholders do not realise that they are paying for something they may not need at all: medical coverage. If you are in a company that provides high-quality health coverage to its employees, you may not need this additional, expensive package.

One part of the table indicates how an ordinary policy comes with a medical-coverage rider.

On the other hand, if you only receive health coverage from social security, the rider may actually come in handy – a promise to pick up part of the tab – if an accident befalls you.

According to the Insurance Department, life-insurers are not allowed to sell health-coverage-only policies. Only regular policyholders are allowed to add health cover to their existing policies. The department, though, has relaxed its rules for non-life-insurers to be able to sell health-coverage-specific policies.

All life- and non-life-insurers offer diverse health coverage with different premium rates. Unlike with an ordinary policy, health-coverage-only premiums cannot be redeemed and the policies are excluded from the purview of tax deduction.

Currently, the maximum yearly income-tax deduction for premium payments is Bt50,000.

Term policies are for those who want to take their money in less than 10 years or are too old to be sold 10-year – or longer-duration – policies. Insurers usually want aspiring policyholders aged less than 60 years.

Savings policies are for those looking for interest rates higher than the ones the banks offer, the insurer-policyholder tie-up being a long-term one. Insurers currently promise returns of about 4 to 6 per cent a year, with a 20-year deadline.

A single-premium policy requires a buyer to cough up a whale of an amount at one go right at the beginning. The coverage spans the number of years promised in the policy. It suits those who like their interest rates higher than the ones the banks are capable of but, on the other hand, the premiums are rather high.

Although the market abounds in financial investment tools – including banks, mutual funds and stock markets – and there is reason to feel that further additions are likely in terms of both variety and profusion, insurance is certainly an attractive proposition, even if it calls for a very careful exercise of the divine gift customarily described as prudence.

According to the Bank of Thailand, the headline inflation rate for this year is marked up to 5.9 per cent. Do you want to leave your money with insurers just to receive the maximum 6-per-cent interest in the next 20 years?

If you save as much as you would shell out by way of premiums and invest the cash through other financial tools, the return may probably be higher, but you will need to know what you are doing.

Insurance is essentially a way of investing your money, but to freeze most of your savings in it would be to make a mistake. Investing in fixed-income funds – which assure you of the capital and a fixed return – is more attractive.

If you are wealthy enough to be able to pay your hospital expenses, you may quite profitably ignore insurance and look for greener pastures.

But, until you reach your organisational hierarchy’s summit, you should consider a whole-life policy. It covers only the life of the policyholder, making it affordable. Should you pass away, your nominee will get the money and go on in life.

That, after all, is what a life insurance policy is for.

Piyarat Setthasiriphaiboon

The Nation

Post your comment to this story here