Life insurance is an important policy product that can protect loved ones when they are most vulnerable, often for less than a dollar a day.
By Nadia Ebanks, PAHM, Assistant Broker at Bogle Insurance Brokers, Grand Cayman
Emerging in the early 1700s, and explained in its most basic form, life insurance may be classified as financial protection for your estate and loved ones in the event you are no longer there to provide, delivering reassurance to you and your dependents that they will be looked after.
There are two main categories of life insurance: as a protection product and as an investment product.
A protection product usually offers a lump sum payment at death; a Term Life Policy is the most common form of this product. A Term Life Policy runs for a fixed period of time – such as 5, 10 or 25 years, and pays out only if you die during the policy.
An investment product focuses on growing your principal by way of premiums. A Whole-Life-Policy is such an example and pays out no matter when you die, as long as premium payments are met.
To determine whether you need life insurance think of it in these terms: do you have dependents – a partner, children (especially school age) or other relatives that rely on your income to cover the mortgage and or other living expenses? If the answer is yes, then it is wise to have a life insurance policy that can provide for them in your absence. It acts as income replacement for your family, pays for their education expenses and allows them to maintain the same standard of living under the worst possible circumstances. As the primary income producer you should purchase enough insurance to cover their needs in the event of your death. It is also prudent to consider a policy that covers funeral expenses.
Recently, a family friend asked me if she needed life insurance although she is only eighteen years old. I highlighted three facts for her. One, life insurance is best purchased at a young age as it offers a great advantage with premiums; it will be cheaper and often locks in for life or a specified period. Two, you can utilise life insurance as an investment tool to start preparing for your future. Three, it is best to purchase life insurance while you are in good health.
At the end of our conversation, it was clear to her that there are no disadvantages when life insurance policies are purchased and serviced correctly, even at such a young age. And when you consider that the average premium for a non-smoker aged 18 who purchases a $500,000 life insurance policy for 30 years is less than $1 a day, it makes absolute sense.
Given all the advantages to purchasing life insurance, from protecting your loved ones and estate to acting as an investment, it is no wonder that many people today recognise that it may be one of the most important financial decisions you make.
As Dr. Solomon Stephen Huebner wrote, “Were it not for human life values there would be no property values at all.”
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