Life insurance can be said to be one of the effective means to prepare for unforeseen circumstances. There is no life insurance policy that covers all risks, so it is important to consider what kind of life insurance policy is right for you.
However, there are two types of life insurance, one is the non-payment type and the other is the savings type. Here, let's explain the difference between non-payment type insurance and savings type insurance.
Characteristics of non-payment type insurance and savings type insurance
Life insurance can be divided into non-payment insurance and savings insurance depending on whether you can receive the insurance money at the time of maturity. First, let's take a look at the features, pros, and cons of each.
Features of non-payment insurance
Non-savings insurance is insurance that does not have a cash surrender value (surrender value). It can be said to be the prototype of insurance, in which people who are worried about unexpected illness, injury, or unforeseen risks contribute money (insurance premiums) to each other and receive coverage when an unforeseen event occurs to that person. . In general, the contract period is often fixed, and representative non-recurring insurance includes term insurance and income protection insurance.
Advantages and disadvantages of term insurance
The advantage of non-recurring insurance is that the monthly premiums are lower than savings-type insurance. It is suitable for those who want to receive generous coverage at low premiums.
However, if an unforeseen event occurs during the contract period, you will be covered, but if nothing happens, the premium you paid will not be returned as a general rule.
Features of savings-type insurance
Savings-type insurance has a savings feature in addition to the function to prepare for unforeseen circumstances. Typical savings-type insurance includes whole life insurance, endowment insurance, and endowment insurance.
Whole life insurance is insurance that lasts for the rest of your life. A death benefit is paid when the insured person (the person insured) dies, helping support the livelihood of the bereaved family. If the premium payment period is set to be until the age of 60, etc., there will be no premium payments after that. The surrender value increases the longer the subscription period, and in many cases exceeds the amount paid after a certain number of years. The amount you can receive as surrender value will vary depending on the premium paid and the refund rate.
Advantages and disadvantages of savings insurance
Savings-type insurance not only provides coverage in the event of unforeseen circumstances during the policy period, but also allows you to receive a surrender value depending on the amount you have paid up to that point if you cancel the policy. In the case of endowment insurance with a fixed period of coverage, the maturity benefit is received after the period expires.
Monthly premiums for savings-type insurance are generally higher than those for non-recurring insurance. Also, if you cancel early, the amount you receive will often be less than the cumulative amount of premiums you have paid, and in some cases you may not receive any amount.
Which should you choose, non-payment insurance or savings insurance?
Both non-payment insurance and savings insurance are products that have been created in response to needs, and neither is superior.
For example, some people think that if there is nothing during the term of the contract, they will lose money because the premiums paid will not be returned. However, non-payment insurance is cheaper than savings-type insurance, so it is suitable for those who want to receive generous coverage while reducing the financial burden. It can be said that it is important to choose the insurance to join according to the purpose.
We will introduce you to what kind of situation each type of insurance and savings type insurance is suitable for.
People who are suitable for single-use insurance
Non-payment insurance is suitable for people who want to prepare for risks that cannot be covered by savings alone with low premiums. Even if you save for the unexpected, there are times when your savings alone won't be enough to cover the eventuality of death, illness, or an accident.
For example, if a parent dies while the child is still young, it is difficult to cover the living expenses and educational expenses of the remaining family with savings alone. To prepare for the risk of death until your child grows up, you can prepare for a large risk while keeping the insurance premium low by purchasing a non-recurring type of life insurance.
In addition, since premiums of non-payment insurance are lower than savings insurance, surplus funds can be used for savings or other purposes.
People who are suitable for savings type insurance
Savings insurance is suitable for people who want to prepare for life events while preparing for risks.
For example, life events such as a child going to school will inevitably come over time, and a large amount of money will be required at that time. By taking out savings-type insurance such as student endowment insurance and individual annuity insurance, you can prepare for expenses in such life events.
Savings-type insurance is characterized by its savings, although premiums are higher than non-repayment-type insurance. By paying premiums, you will also be able to build funds for the future.
The difference between non-payment insurance and savings insurance
| throwaway insurance | savings insurance |
Contract period | Regular | lifetime or term |
In case of unforeseen circumstances during the contract period | can be insured | can be insured |
If you cancel in the middle of the period | Cancellation refund will not be paid | Cancellation refund will be paid according to the amount paid |
When it expires | cannot receive maturity benefits | Receive maturity benefits. Whole life insurance and annuities do not have maturity benefits (surrender refunds and annuities may be received). |
Insurance fee | set at a low | set high |
representative insurance | Term insurance, medical insurance, cancer insurance | Whole life insurance, endowment insurance, educational endowment insurance, individual annuity insurance |
suitable person | Those who want generous coverage at a low premium | Those who want to save for life events while preparing for risks, and those who want lifelong protection |
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