Friday, June 24, 2016 /R.A. Bridges
Your family should be insured against all risks: life, health insurance with wide coverage, serious illnesses, disability and properties. Maybe your children are little and they are completely dependent on you. If something happens to you, and you are not insured, your family will not miss you. They’ll have so much to take care of to avoid going into bankruptcy, that they won’t have time to think of you... Or maybe they would, but not with the feelings you were expecting.
However, is life insurance necessary?
The idea of life insurance is to protect both your dependents and your pending issues. It is a contract between you and your insurance company in which, in case you pass away while the policy is in force, the insurance company will take the responsibility to pay your family, or the people you have chosen, the stipulated amount. In exchange, you must pay regular premiums.
The following test will help you determine if you need a life insurance policy:
► Do you have people that depend on you (children, parents, siblings, etc.)?
► Do you have any mortgage loans?
► Do you have any debts secured by a family member or friend?
If you answer “yes” to any of the above questions, you require a life insurance policy. You should leave your dependents protected, avoid getting your home taken away or any other mortgaged property or avoid getting any family member or friend in debt because they trusted you to the point of being your warranty.
Moreover, when should you get life insurance?
As soon as you run into one of the situations mentioned previously. The most common situation happens when you have a steady partner. There are situations you can face:
a) you provide revenue for both. In that case, you should get an insurance plan with your partner as a beneficiary;
b) your partner provides the income. In that case, you should be the beneficiary;
c) there is a mutual dependence. Both incomes let you maintain a quality of life. Ideally, in this situation, is to get a joint policy in which you will be mutually insured. If the premature death of one of the two occurs, the other one will receive the benefit.
If it’s you who depends on your partner’s income and you don’t have insurance, you should take the initiative since you’ll be the one who will suffer the consequences in case of his/her premature death. Talk to your partner about this matter. He/she will understand since he/she doesn’t want you to wind up homeless. If you consider it is a difficult topic (it is never easy to talk about death), get some help from a common friend or an advisor (lawyer, accountant, marriage counselor, spiritual guide, etc.). He/she will know how to bring up this subject so that it doesn’t create conflict. Needless to say, when children arrive, life insurance is essential.
And, What kind of life insurance is the most suitable to protect your family?
Well, you already decided that you needed additional protection and you set the amount. Now, here comes the third question: what kind of insurance should you get?
You will have to analyze the market first, assess the different modalities and choose the one that best suits your particular situation.
With the wide variety of possibilities offered nowadays, the decision is not simple. Let’s try to make it easier for you by giving you a brief review of all the common policies offered by insurance companies. Probably not all of these modalities are offered in your country.
Generally speaking, there are two kinds of life insurance:
► Simple life insurance
► Life insurance with savings
The simple kind refers exclusively to protection, whereas the one with savings offers, in addition to this, the possibility to invest.
PS. If you want to read more about insurance and the alternatives that you have, must considered to read the whole chapter 3 of my book “Finance for dad”. It is available on amazon now.
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Source: Finance for Dads by R.A. Ridges