I always used to wonder whether paying a hefty premium for life insurance is a good idea. Granted some of us need to buy life insurance as it is mandatory under our loan agreement with the lender or comes as an add-on with our credit cards and in some instances is provided by the employer and deducted from the salary saving us a bit in our income tax. But I was wondering whether there is any value for those of us who buy life insurance paying month after month and not knowing whether it is of any real significance.
The Whole of Life insurance is slightly different as there is a pay-out at the end and if there is an investment option tied to it, then you have some more money coming back. But with term assurance, you don’t get anything back!
One statistic that I came across recently changed my view and I believe beyond doubt that investing in term life insurance is definitely a good idea. The office of national statistics in the UK published the fact that one in twenty die during their working age. This means that 20% of people will be facing untimely death. They would not have had the time or means to ensure that their families have sufficient cash flow to see through, not much for the kids to be independent or have the means to become independent and worse of all, their families will have to lose everything from their home to their car and other house hold goods if they have been bought on a loan.
The frightening statistic means that inevitably some of us will be bearing these consequences if we are not proactive.
So having dealt with the risks of not having life insurance – the types of life insurance are as follows. It is important to bear in mind that these are my understanding and should not be construed as advice from Best Insurance.
1. Whole of life – you are covered until you die. If you have an investment option, you also get some money back while you are alive
2. Fixed term assurance – the term of your life insurance is fixed and if you die within that term, the benefit amount will be paid. The benefit amount can also be indexed linked so that it increases as the inflation increases.
3. Mortgage or Decreasing Life Insurance – this is suitable if you specifically want to tie your insurance to your commitments such as a mortgage and you are on a re-payment mortgage. If you die with in the term of the policy, there will be sufficient money to pay off your loans and will protect your family from continuing to live in their current place without any dishevel.
4. Terminal Illness Cover – this is an option that can be taken with any of the above policies and means that if you become terminally ill i.e. the doctors give you less than 12 months to live, you can claim on the policy and see the money while you are still alive.
If you do not want your families, dependants and near ones to suffer financially when you are not around, Life Insurance is perhaps the best option available to you.
So in summary, if you want to protect your families and take responsibility for their happiness beyond your life – its only a small monthly investment.