“You don’t buy life insurance because you are going to die,
but because those you love are going to live.”
Death is an unavoidable, unchangeable reality of life. A hard truth, that one must accept and be prepared for.
How does one prepare for the eventuality of death, when it does not come with a set date?
If the idea of passing on your stresses and liabilities to your loved ones, or those who depend on you being left with little to nothing to move on with their lives in the event of your passing worries you, then one of the ways that you can prepare for such eventualities is by purchasing a life insurance.
What is life insurance?
In common parlance, it is a binding contract between the insurer (i.e. the insurance company) and the policyholder (i.e. you / insured). It guarantees to the policyholder a sum of money payable to the beneficiaries (i.e. your loved ones) by the insurer when the insured dies. This is done in exchange for premiums that were paid by the insured during his or her lifetime.
Such a life insurance policy is one that is unique to the insurer and insured concerned. That is, it is unique to you, your requirements and circumstances.
In that sense, it is much more than just a contract. It is a risk planning tool as well.
When should you get life insurance?
While this is by no means a discouragement to those who are older, it is always advantageous to get life insurance when you are young. This is because you pay less in terms of premiums, provided that you are of satisfactory health. Therefore, as a rule of thumb, the younger the better.
Moreover, it would be a smart move to reevaluate your life insurance needs whenever a significant life event takes place, such as marriage, birth of your children, starting your own business, buying a house etc. These events are some of the key triggers to motivate you to get a life insurance policy for yourself.
Here’s why life insurance is so important.
A. Protects your family and dependents financially
A good life insurance policy relieves you from the burden of how your family or dependents will cope in your absence. The insurance payout or death benefit can be used by them for their monthly expenses or to fulfill important life goals such as marriage or education, without having to compromise on their lifestyle or day to day goals too much.
B. Supports settlement of final expenses of the insured
Funeral arrangements are no longer cheap. A part of the insurance pay out could be used by your family to conduct your final rites, as well as to settle any legal and administration fees associated with your estate.
C. Protects assets such as your home and your vehicle
Let’s face it. Not everyone has the luxury of purchasing houses and vehicles by paying cash upfront. Most of us find ourselves seeking housing loans or mortgages to purchase a house or build one, and leasing schemes for vehicles, to provide the best life and comforts to our loved ones.
Having a life insurance policy with the right cover helps prevent these assets turning into liabilities and debts. It further prevents your loved ones from losing them due to being unable to pay the installments on time after you are gone. The pay out can be used by them to pay such debts, thereby protecting the assets and ensuring they can be used continuously as you had intended.
It goes without saying that the insurance policy needs to take into account such liabilities in order to ensure your loved ones will be able to enjoy such benefits.
D. Acts as an investment for future life goals
Most life insurance options now offer an ‘investment’ add-on whereby, you not only receive a life cover but also an accumulated fund at the point of maturity. This could come in handy as a retirement planning option or you could use it later on for your future goals, whatever they may be. In the event that you pass before having a chance to use it, your beneficiaries will be entitled to its full benefit.
Either way, it is a win-win!
E. Protection against critical illnesses and hospitalization benefits
Life insurance is no longer limited to death benefits alone. They can be customized to help you and your loved ones financially during a time of critical illness. That is, if you are diagnosed with any of the critical illnesses listed, after the insurance policy is activated, the insurer will pay a lump sum to you for it.
Not only that, life covers also provide hospitalization benefits, financial assistance for medical tests and even pharmacy bills during different times of the year. This is not limited to the country in which the policy is taken. It can be customized to protect you even when you are outside your home country as well.
Policies can also be customized to extend some of your policy’s benefits to your spouse and children too.
Some life policies provide for a health check up during the year.
Life insurance policies are timely instruments when it comes to health concerns. For example, after the COVID-19 pandemic, life insurance policies are now capable of assisting you and your loved ones in the event that you contract COVID as well.
Such policy components make a life insurance policy relevant as one that values you not only after you are no longer alive, but also while you are alive and contributes to prolonging your life as well.
F. Protection for your business lender or business partner
Let’s say you have taken a business loan to start your own business venture. Taking a life insurance policy with the lender named as a beneficiary will provide protection to such a lender in the event where you pass leaving an outstanding balance.
Similarly, it is a sound business decision to take out a life insurance policy and name your business partner or partners, to protect them against any financial debts, bumps or hurdles they may face after your passing.
This is an example of how you can take out a life insurance policy in light of your personal goals and dependants other than your family members and loved ones.
Everyone must engage in financial planning at some point of their lives, be it at 18 years or 35 years. When you engage in a financial planning exercise, thinking about life insurance ought to be one of the items on your to-do list.
There is no doubt that with the right policy, for the right sum, you can work towards building the future you’ve envisioned for your loved ones, without having to worry about whether or not you will be present to witness those dreams come to fruition. It is an effective measure by which you can look after the best interests of those who depend on you, even when you are gone.
In that sense, it is more than just a financial planning tool.
It is an act of love.