4 Simple Reasons Why People are Buying Life Insurance
What do you think of life insurance? Many people have a love and hate relationship with it. In some cases, life insurance payouts have been received courtesy of loved ones, in other cases, people have taken out life insurance due to a persistent insurance agent, and in others, some have forfeited their policies or lost money. Generally, I feel that life insurance is not well understood and its benefits are not clear.
We will discuss life insurance basics, why you should buy it, and some drawbacks in this article.
Financial Security for Family
Basically, you take life insurance policies to provide for your family and loved ones with a sense of peace financially in the event of your death. You ensure that your family is not left worse off in your absence.
We have had families who have suffered greatly because their breadwinners passed on or left them with a debt they can’t finance. However, those families with a life policy can bridge the gaps left behind.
Life insurance can be used to transfer your wealth to the next generation. It can be considered your children’s inheritance.
Continuity of Projects/business:
Taking up a life insurance cover also ensures that your dreams are fulfilled whether you are around or not. That means the funds from your policy can be utilized to continue educating your children, finish a project e.g. Mortgage, building a home, or/and for business continuity.
Loan and Liability payoff
With a life policy, your family or loved ones will be able to pay off the debts and loans you have taken. This will ensure your family doesn’t have to struggle to pay the liabilities you have left behind.
When you take a life insurance cover you will enjoy tax relief on your income tax of up.
For example, Peter has a successful software development business and his wife Mary is
employed making an average of about 80,000 per month. They live in kilimani, and their two children go to international schools.
Unfortunately, Peter was involved in an accident and passed on. His business collapsed because he was the principal developer in the business, and without his skills, the business couldn’t generate income. Peter had also taken a load to scale the business, but it had not started generating income.
Mary had to make major life adjustments, from getting friends and family to assist with the funeral cost, moving house, moving children to more affordable schools, and paying off loans. In general, she needed to downgrade her life.
However, Peter had taken a life insurance policy for 5 million of which Mary got paid 200% for accidental death. Mary got 10 million to cover her family expenses, pay off the loans, pay for the children’s international school fees for a few years and employ a software developer who can ensure continuity of the business.
IN conclusion, taking a life insurance coverage that fits your needs and that you can afford is one of the best financial decisions you will make.
Important facts about life insurance.
- It is important that you are able to pay the premiums. Ensure that you will be able to continue making payments. You risk losing your premiums if you are unable to continue making payments during the first three years and a significant amount if you opt to surrender the policy before the year of maturity.
- There is a waiting period for most insurance covers. That means you can’t take up the cover and benefit from it within the first 6 months of the policy.
- Depending on the sum assured (the amount your family receives) you may be required to provide medical check-ups for the insurance companies underwriting purposes. This may not affect your premiums or your premiums may increase to cover any risks the company fills they need to cover.
You can take life insurance at any stage of life. The sooner you take it the lower your premiums. Everybody can afford life insurance and if you have people you love they will love you more for it.
For free personal finance and insurance consultation email
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