My wife got a life insurance policy and religiously paid the premium for 5 years. Last week, she informed me that her insurance had matured. I just nodded because I thought all along that the policy is already matured but she remains insured if she will not withdraw the proceeds. But this morning, I learned that she had withdrawn the proceeds (she’s already awaiting the check) because the maturity is the end of the insurance, meaning she has no choice but to receive the proceeds. She had paid a total of 200,000 pesos in 5-years time and now she is poised to receive 180,000 as the proceeds. What? She lost 20,000 as if she had paid for the 5 years that she was insured. Tsk, tsk, this is a caveat for those buying life insurance.
I've heard several similar stories about life insurance, and even when the worst happens and it pays out, you don't always get out what you paid in. A friend recently moved his when he worked out that under his original scheme, if he died his wife would only get a payout equal to one third of what he would have paid into the scheme by maturity. It would have made more sense to put the money in a mattress! If you are self-employed or a freelancer and take out one of these policies be really careful. If the payout is based on salary I've heard of insurance refusing to pay out at all.
