4 Essential Things you need to know as a Policy Owner [Check List]

Posted 24 November, 2016 by Clearly
in Educate Yourself

It is a fact of life.

We buy stuff. And then we forget about it.

Like shoes. Electronic Gadgets. Exercise Equipment (speaking from personal experience here).


Life Insurance.


While we can simply throw away (or donate) unused footwear, rusty radio clocks, and bulky ab machines, things are not so straight-forward when it comes to Life Insurance.

Like so many people around us, you probably bought Insurance a long time ago. You had a vague idea about it when you signed up, and the agent seemed to make a lot of sense back in the day.


But now you mechanically pay your premiums month after month, year after year, without having the faintest idea what the plan is about.

If you find yourself in this situation, stay calm. Blow the dust off your policy documents, and follow our friendly checklist.

You’ll be glad you did.


1. What Type of Plan did I buy?


A most common facial expression, I assure you


When asked this question, most people either respond with blank stares, or with a feeble “I bought life insurance, lor”.

Not good enough, I’m afraid. The devil is in the details, and knowing what type of plan you bought is crucial to future planning needs.

What are the different types of Life Insurance plans anyway?

For easy reference, here is a list.


Term Plan
A no frills plan that focuses on pure coverage and nothing else. Typically ends after a set period of time. (Hence the term, “Term Plan”)

Whole Life Plan
A plan that spans the whole of one’s life. Comes with a cash value component that grows over time.

Endowment Plan
Essentially a savings plan implemented by an insurer, with greater emphasis on steady returns than coverage.

Investment Linked Plan
Combines both insurance and investment needs.

Hospitalization Insurance Plan
Meant to address your hospitalization and treatment costs should you be warded. Also known as Integrated Shield Plans, offerred by various insurers.

Disability Insurance Plan
A plan that provides income replacement to the owner should he be unable to work due to a disability.

Personal Accident Plan
Provides a lump sum of money to the owner if he meets with an (serious) accident. Cutting your thumb does not count. Unless you cut it off.


Knowing exactly what plan(s) you bought will give you or your adviser a better insight as to what was your most probable reason for buying it in the first place.


2. What cover does it provide and how much cover is provided?


It pays to know what you want to buy. It also pays to know what you bought.


After knowing what plan you bought, you need to know:

a) What kind of cover does it provide?
b) How much cover is provided?

Again, here is a (non exhaustive) list for easy reference.


Death, Total and Permanent Disability, and Terminal Illness Cover

Critical Illness Cover

Early Stage Critical Illness Cover

Hospitalization Cover

Disability Income replacement Cover

Personal Accident Cover


After identifying what cover is provided, you need to be clear on how much of that cover is given. This is because needs change over time, and what was sufficient in the past may be inadequate in the future. Or vice versa.

Case in point: 100k of death cover back when you first graduated may be grossly inadequate when you start a family.

You need to know how much you have in order to determine if it is inadequate, or excessive.


3. How long will the coverage last?


How much time is left on YOUR policy clock?


After knowing how much, comes knowing how long will the coverage last. This is a key piece of information because you want your insurance cover to be seamless.

Once you’ve purchased a policy, it can be so easy to just forget about it, even when it has matured or expired. When that happens, you are left without cover – not a fiscally sound situation to be in.


Knowing when the policies expire will let you review your needs well in advance.

Boy scouts have mastered this principle to a T, and it pays to be always prepared too.


4. What was the purpose of buying the plan in the first place?


policy owner

Asking Why: Best done early, best done often.


Finally, there are 101 reasons to buy insurance. Some of them are great reasons, like: I needed X amount of Critical illness cover, I have financial dependents and want to provide for them no matter what happens to me, so on.

Other reasons are not so great.


Examples that come to mind:

The agent was hot. And persistent. So I gave in.

My friend wanted me to support him. So I did.

There was a promotion and I could get a freebie. (This happens way to often!)


You, gentle reader, need to know exactly why you purchased the plan in the first place. Was it for pure coverage? Wealth accumulation? Saving for a financial goal? A combination of reasons?


Knowing the reason(s) gives you more incentive to stick to the plan, thus acheiving your objective you had for it in the first place.

Also, being clear on the reason will help you decide in the future if the plan is still suitable, or if you need to supplement it with other add ons as your needs change.


And So…


I highly recommend that every policy owner (or would-be policy owner) go through this mental exercise to answer these 4 questions. Even make a summary of it – and file it with the relevant policy documents.


An example could look like this:

15 Year Term Plan with 300k Death Cover and 300k Critical Illness Cover expiring on July 2024. Provides me with 5 years of income replacement should I contract Critical illness. Will need a more comprehensive plan in 2020. Currently no additional budget for consideration.


A certain sage of Omaha says:

Risk comes from not knowing what you are doing.


Given that he is worth over 70 billion USD, I’d heed his risk management advice any day.

Wouldn’t you?

If you need to clarify your policy details, approach your financial adviser. If he or she isn’t available, contact the insurer directly. You can also write to us for help. Your insurance policy may collect dust, but your knowledge about it shouldn’t.


A random sage we found


www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.

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