Traditional insurance provides coverage solely for specific risks, without involving any investment elements.
There are two main types of insurance: traditional insurance and modern insurance (commonly known as unit-linked insurance). While many modern insurance products combine protection with investment, traditional insurance remains a compelling choice—especially if you’re looking for pure protection without any investment features.
In this article, Roojai explains what traditional insurance really is and how it differs from unit link. Let’s dive in so you can choose the insurance product that best suits your needs and financial goals.
Traditional insurance refers to a type of policy that offers pure protection against specific risks such as death, illness, accidents, or property loss—without any investment component.
The premiums paid by the policyholder are fully used for risk protection, such as medical treatment or death benefits. None of the premiums are allocated to investment instruments like stocks or mutual funds.
Because traditional insurance focuses solely on protection, it generally offers more affordable premiums and a clearer, more straightforward claim process. This makes it ideal for those seeking maximum coverage at a lower cost.
Traditional insurance is defined by its focus on pure protection. Here are its key characteristics:
Premiums remain fixed throughout the policy term (unless coverage changes), making it easier for policyholders to plan their finances without unexpected cost increases.
In life insurance, the sum assured is predetermined and fixed. If a claim arises due to death or accident, the beneficiary will receive a guaranteed payout as stated in the contract.
Traditional insurance does not include investment features. Premiums are strictly used for protection, meaning policy outcomes are not influenced by market volatility.
Some traditional products like whole life or endowment policies may accumulate limited cash value over time, though at a slower pace than unit-linked products. Term life insurance usually doesn’t offer any cash value.
Coverage is provided for a specific period (e.g., 5, 10, 20 years, or until age 65). Once the term ends, coverage stops unless the policy is renewed.
Even without investment features, traditional insurance offers clear benefits, especially for those prioritizing pure protection:
Designed to protect against the risk of death, this insurance ensures that the beneficiary receives the predetermined sum assured.
Since there’s no investment risk involved, 100% of your premium goes toward protection, making it ideal for those who want security without exposure to market fluctuations.
One of the main goals of life insurance is to provide financial support for loved ones left behind. The benefit payout can help with:
Daily living expenses
Children’s education
Emergency needs
In this way, traditional insurance serves as a meaningful legacy that helps your family stay financially stable.
One of the biggest advantages of traditional insurance is the certainty of claims. Since the sum assured is fixed and doesn’t depend on investment returns, the claim process is simpler and more predictable.
As long as the policy conditions are met, the insurance company will pay the benefit as promised—no ambiguity over investment returns or cash value.
Unlike traditional insurance, unit link is a type of life insurance that combines protection and investment. A portion of your premium is used for life coverage, while the rest is invested in instruments like stocks or bonds.
Though both offer protection, they differ in several ways:
| Aspect | Traditional Insurance | Unit-Linked Insurance |
|---|---|---|
| Main Focus | Pure protection | Protection + Investment |
| Premiums | Fixed and usually more affordable | Flexible, often higher |
| Sum Assured (SA) | Fixed and guaranteed | May vary depending on investment performance |
| Cash Value | Limited or none | Accumulates based on investment returns |
| Investment Risk | None | Present, depends on market fluctuations |
| Insurance Fees | Simple and transparent | More complex, may affect net returns |
| Primary Objective | Financial protection | Protection + long-term asset growth |
| Target Audience | Those seeking protection only | Those looking for long-term investment options |
Traditional insurance remains a popular option due to its simplicity, affordability, and clear protection focus.
For more comprehensive coverage, consider combining it with health insurance. High medical costs can arise unexpectedly, and health insurance can significantly ease that financial burden.
Before choosing any insurance product, ensure you understand your financial needs and long-term goals. Compare options from multiple insurers to find the best fit.
Want to explore insurance products that match your needs? Visit Roojai.co.id to compare trusted insurance plans quickly and easily!