# Why Can Lack Insurance Protection?

Most Indonesians lack insurance protection. The term in the
world of insurance is underinsure . Protection alias owned is not sufficient
actual needs. The end, of course will be difficult. Great hope that insurance
will eliminate the difficulty when the head of the family is not able to give a
living, gone already.

Many examples. Evita Carolina (39) Bekasi residents with
three children say paying life insurance premium of Rp 2.8 million per year.
The sum insured is only Rp 50 million. "It is lacking, but there is no
plan to add more," said the housewife who just gave birth to this third
child. Nurul Pramudya (36) is more extreme. He only has an education insurance
of Rp 10 million for his two children. In fact, since her husband died 9 years
ago, he fought alone to support his two children. If there is a risk of death,
both children will only receive the sum assured of Rp 10 million only. "In
the past, the number has been big, but now it is very small," Nurul said,
acknowledging the small amount of sum assured.

Meanwhile, Fitri Dharmayanti (40), a businesswoman in
Bengkulu, said she and her husband have unit link insurance with Rp 500
million. It seems that the sum insured is huge. With a living cost of Rp 8
million per month, this sum assured can meet the needs of his family for five
years. After five years the money will be exhausted while his son who is still
attending primary school has not been able to meet the cost of his own life.

Why do most insurance customers not have sufficient
protection to meet their needs? This happens because the customers themselves
do not know how much protection is needed. Most people buy insurance based on
the promotion of the insurance agent, not the awareness of sufficient
protection needs. So, between the needs and the protection offered is not
comparable.

In addition to lack of information from insurance agents,
customers also do not have the ability to calculate how much protection needs.
In fact, how easy enough lho.

**How to calculate**

There are several methods used to calculate insurance needs.
The first way is to calculate based on human live value. This method determines
the sum insured money based on how much income a family head has annualized.
This income is multiplied by how long the fund may be needed by the heirs until
the heirs can be independent. Usually, the benchmark used for heir time can be
independent after he finishes college. The assumption, the child or heirs
finished college can work and support themselves. This sum insured does not
take into account the growth of funds if deposited in a bank or other
investment instrument.

So for example a Budi family with a father, 35-year-old
Budi, has an unemployed wife and a five-year-old child. Father's income of Rp 5
million per month. Then based on the method of human live value, the sum
insured money required is Rp 5 million x 12 x 20 years = Rp 1.2 billion.

Why multiplied by 20 years? The 20 years is a time to be
protected. Given that the child is currently 5 years old, in the next 20 years
he will be 25 years old, is expected to have finished college and can finance
himself so that no longer dependent of insurance money

So this family needs insurance money amounting to Rp 1.2
billion to protect the family's needs for 20 years.

The higher the sum insured, the higher the premium to be
paid. If to get the sum assured of Rp 1.2 billion premium to be paid is
expensive, this way can be replaced by taking into account expenditure, not
income.

Supposing of the income of Rp 5 million is the cost of
family needs of Rp 4 million, then the calculation becomes Rp 4 million x 12 x
20 years = Rp 960 million.

There is still a way to calculate how much money insurance
money, the second way is income based value (IBV). In this way, it is necessary
to calculate how much money should be invested in order to make money of Rp 4
million a month like the example above to meet the needs of the family. The
funds should be invested in a secure investment instrument. Currently,
investment instruments that are categorized as safe and yield higher than bank
interest are Indonesian state bonds (ORI).

Currently, the ORI rate is at 7.3 percent, minus 20 percent
of the tax so that net returns are gained 5.84 percent per year or 0.48 percent
per month. Well, to get funds amounting to Rp 4 months as expenditure per month
with an interest rate of 0.48 percent per month how much investment is needed?

Calculation method, Rp 4 million / 0.48 percent = Rp 840
million. So ideally this family has a risk-free investment fund of Rp 840
million to be able to meet expenditures of Rp 4 million per month. Where does
this investment fund come from? These funds are earned from insurance money. So
with the IBV method, this family needs a sum assured of Rp 840 million in order
to generate funds of Rp 4 million per month if the breadwinner dies.

While the third way is called survival based value (SBV). In
this way, it calculates how much debt should be protected and how much income
should be protected until the person left (called survival) can work. This
method assumes the abandoned person will work and will work after the
abandonment of the head of the family.

If using this method, there are some things to watch out
for. The greater the money to be paid, the greater the insurance money
required. In addition, the higher the education and the more experience a
partner has, assuming the sooner he gets the job. Another factor to be taken
into account is how much of the emergency funds the family has.

For example the Danu family (38). Danu earns Rp 10 million
per month. The wife, Ani is 30 years old and only two years do not work.
Previous wife works with a salary of Rp 4 million per month. Budi's family
bought the house in installments. The house is worth Rp 400 million and the
remaining debt of them Rp 300 million. Monthly installments amounting to Rp 1.5
million. Total family expenditure is Rp 8 million per month. The Danu family
has an emergency fund of Rp 50 million. How much protection should the family
have?

Taking into account an emergency fund of Rp 50 million, with
an expenditure of Rp 8 million means the funds can be used to cover the cost of
daily living for 6 months.

In addition, taking into account work experience and wife
expertise, it is assumed he will be able to find another job soon after her
husband dies. If the last income is Rp 4 million, it is estimated that the
wife's earnings if working again there is a 10 percent increase, meaning that
the income potential of this family is Rp 4.4 million per month.

When binding on a credit agreement, the creditor is usually
insured for the loan. So if you die, the rest of the mortgage bill will be
repaid by the sum insured from the credit insurance. So the expenditure of Rp
1.5 million to pay the mortgage repayment no longer exists. The cost of living
fell from Rp 8 million - Rp 1.5 million to Rp 6.5 million. With a wife income
of Rp 4.4 million and expenses of Rp 6.5 million, this family still lacks
income of Rp 2.1 million per month. So Rp 2.1 x 12 x 20 years = Rp 504 million.
Well, Rp 504 million is what is a shortage that must be covered from insurance
money. With a sum assured of Rp 504 million plus a wife working again, this
family can still meet their daily needs if the main breadwinner dies.

The results of these methods are different. Choose what
suits your financial situation. Do not worry first if the calculation results
say you need the sum insured up to billions of dollars. Look for the type of
insurance that suits the pocket.

To get the sum assured of Rp 1 billion, if you are young
around the age of 30s and healthy, it costs only about Rp 3 million per year if
taking term insurance or term life. Of course premium money will be more
expensive if age increases and health is disrupted.

Therefore, do not delay buying protection, for the sake of
beloved family.