Pay Insurance Premium Monthly and Get Double Protection

A few days ago I attended an interesting presentation from an insurance company (Sequislife Indonesia). Some details of the illustration:

• The sum assured for life insurance is Rp.100,000,000 (USD 10,000) and there is an additional investment in mutual fund managed by Schroder. It is assumed that the return of the investment is around 17% a year.
• There is also a health coverage for critical illness, hospital expenses up to Rp.220,000,000 per year.
• The annual premium is Rp.15,000,000 (around USD 1,500)
• The payment premium period is 8 years

Although it is a very good program, the considerably high annual premium payment may deter some people to take this program. The insurance company offers a monthly payment program but there is better alternative.

The solution is to use an automatic saving plan offered by some banks. In this case, I’ll use Mandiri Tabungan Rencana (MTR) offered by Bank Mandiri. Some details of MTR:

• The minimum term is one year (it can be up to 20 years)
• The minimum monthly saving is Rp.100,000 (USD 10)
• The interest is 0.5% higher than the bank saving rate. At the time of writing, the interest is 4.25% p.a
• There is an insurance coverage from PT AJ Manulife up to Rp.5,000,000 (USD 500) per month in case of death or total permanent disability. The insurance premium is basically free because it is paid by the Bank.

How can you use this?

1. If you decide to take the program illustrated above this month, you need to pay the first annual payment, Rp.15,000,000 in full.
2. In the same month, open an account in Bank Mandiri and start an MTR program.
3. Choose one year term and monthly saving of Rp.1,250,000. It will be automatically debited from your account every month so you do not need to worry about missing any payments.
4. At the end of the one year term, use the collected amount of Rp.15,000,000 to pay for the insurance premium.
5. Repeat Step 3

What are the benefits of using this method?

• Pay monthly instead of annually
• Get additional protection for free
• Earn interest on your monthly saving that’s even higher than the interest in regular saving account

You may be able to use this method with any insurance company or banks of your choosing that may offer similar programs. Please check thoroughly with your insurance company or bank before making any decision.

Learn and Grow!

Disclaimer:

All information provided on this site is for informational purposes only. This blog post is not meant as a financial advice. I’m only sharing my experience.