Investing in Unit Linked Protection Products

as written by Vincencius Santoso, Account Manager – Business Development Division

For the past couple of years Indonesia had been a very lucrative target market for many Financial Institutions based in Europe. Instant example for this is the big columns in leading newspapers like Kompas or Jakarta Post posted their financial positions and Profit and loss statement these financial institutions had made within previous years. The questions are, what made these companies big, and what kind of attractions do they offer to the majority of Indonesians?

The answer is financial product, they could be varied in many forms like; easy mortgage, Reksadana, bonds and equity investments, foreign exchange, and insurances. Let us talk about insurance, first of all, we have long known that insurance is a good protective measures for any aspects of life that is fragile, either it’s medical insurance, life insurance, education insurance, car insurance, and many others. The point is protection against forces beyond control that might lead to great devastation for the parties affected, for instance the loss of income caused by the inability of an individual to work due to work hazard, or loss of car caused by crime. People sees insurance as an added value to protect themselves against life’s bitter realities that sometimes is, well, unavoidable and unpredictable. Many people think, it is always better to anticipate things before it actually happens.

However, often times these precautionary measures cost us just way too much and furthermore, people might think it is somehow such a waste to keep on paying premium that vanishes in thin air if it goes unclaimed. That’s the past insurance, insurance nowadays, especially life and medical insurance offers more than just a protection. They created a product, commonly known as unit linked product which enables client to enjoy life or medical protection with an added value of investment where their money is let grown by linking the premium paid to fund in particular.

So what is fund? Fund is one of money market instruments which consists of hundreds portfolio of equities within. The performance of these equities within would then determine yield or performance of fund in particular, while equities themselves would be linked with the performance of the companies within an industry. At this point people would normally buoyed by the fact that their money could grow at higher rates compared to bank’s time deposit, but be aware that since your money is now invested, there are risk associated with it. There is never an actual guarentee by any providers that your money will remain at least the same amount of money you have already paid. So before you get yourself into any unit linked insurance you need to identify your needs first, whether you are looking for a savings plan or you are looking for a protection plan with additional value of investment.

If you are looking for a savings plan and you are in need of this money on daily or periodical basis then the answer is regular saving account at the bank. But if you are looking into long term savings and protection plan, it might be worth looking into Unit linked insurance. The idea of saving on unit linked insurance would be based on this; basically the growth of fund in the long run would eventually grow upright and any downturn are generally happens on the short run only. So, when we are looking for at least 5 to 10 years of investing, it is a great alternative to conventional savings at the bank where the growth rates of this fund are generally grows at higher rates compared to what is offered by banks. Unless of course there is major crunch at money market like what the world is experiencing globally at the moment.

Looking or considering into unit linked insurance people? Id say, why not, you normally enjoys good life and health covers plus a long term saving in form of investment in managed funds or equity funds. But first of all you will need to consider your goals, analyze your financial position carefully so that this financial products able to assist you and giving you an added value rather than a burden caused by lack of information and knowledge on their terms and conditions plus incorrect information about risk associated with it and general understanding of the product features. Always remember to adjust these products to your needs and goals rather than you adjusting your financial positions to these, it is meant to assist you rather to be an unnecessary burden. Happy investing!!