Life Insurance
THE IMPORTANCE OF LIFE INSURANCE
Life insurance is a crucial element of financial planning, offering protection for your family and home in the event of your death.
Some people might view life insurance as just another expense, but it’s essential to consider whether anyone would face financial hardship if you were to pass away.
DO YOU NEED LIFE INSURANCE?
If you are married with young children who rely on your income, the need for life insurance is evident. Your death could result in immediate financial strain due to the loss of your income. Even if one spouse is a stay-at-home parent without a formal paycheck, their death would lead to additional costs such as childcare, cooking, and housekeeping—services crucial for maintaining the household.
Even if you don’t have children or aren’t married, life insurance may still be necessary. If your partner or significant other relies on your income for household expenses, life insurance provides a crucial financial safety net.
FINANCIAL IMPACT OF LOSS
The death of a loved one is emotionally devastating, and financial stress can exacerbate the situation. Without adequate financial resources, your family may face challenges such as moving to a less expensive home, abandoning education and career plans, and reducing their quality of life. They might even need to take out loans to cover funeral costs, outstanding medical bills, and taxes.
TYPES OF LIFE INSURANCE POLICIES
There are two main types of life insurance: ‘Term’ insurance and ‘Whole of life’ insurance.
Term Insurance: This policy covers you for a specific period, such as 20 years. It is generally more affordable but only provides coverage for the fixed term, and premiums paid during this period are not recoverable once the term ends.
Whole of Life Insurance: This policy covers you until death, often accumulating savings as part of your premiums. It can be converted from a term policy.
USES OF TERM AND WHOLE OF LIFE INSURANCE
Term Policies: These are ideal for covering debts like mortgages or addressing shortfalls in savings. A decreasing term policy is particularly suitable for mortgage debt, as it decreases in value alongside your mortgage balance.
Whole of Life Policies: These can be excellent tax planning tools. They can cover your inheritance tax bill, preventing your family from having to sell property to pay the tax. Additionally, these policies can be placed in trust, so the payout falls outside your estate and is not subject to inheritance tax.
INDEXED UNIVERSAL LIFE INSURANCE (IUL)
Often referred to as IUL, is a type of permanent life insurance. Unlike traditional life insurance, IUL offers both a death benefit and the potential for cash value accumulation based on the performance of a stock market index. This unique structure provides flexibility in premium payments and coverage amounts, adapting to your changing financial needs over time.
CRITICAL ILLNESS AND DISABILITY COVER
Critical Illness and Total Permanent Disability cover are also vital. Consider the impact of being unable to work due to illness or an accident that prevents you from doing your job. While no one likes to think it will happen to them, the reality is that serious health issues are fairly common.
If you need life insurance, contact us to explore your options.
