Insurance has become an important part of our lives. We have home insurance, car insurance, home insurance, life insurance and even payment insurance – remember that infamous PPI scandal? – While some of them are more popular than others, insurance plays a major role in the way we conduct our daily activities.
Life insurance plays a much bigger role because it makes people deal with the idea of death and how it can impact your loved ones or those depending entirely on your income.
Either way, not a lot of people enjoy discussing this rather dark topic, yet there are some misconceptions about life insurance that need some clarity as well as an explanation of the different types of life insurances.
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It is true that life insurance may not be suitable or necessary for everyone. For instance, people with no kids or people with nobody financially depending on them may not need life insurance.
People with the financial means and assets to cover the debt, the funeral costs and also capable to leave enough funds so the family can cover expenses for years to come, may not be in a hurry to get life insurance.
If you have people depending on your income or if you have significant debt, then it is a good idea to start building insurance in case you are no longer around.
If you are still a young adult it may be a good idea to get life insurance now and if you survive to old age you will have a solid ground for your loved ones, but you should only consider it when you feel like you need it.
There has been a lot of debate to whether life insurance is an investment or not and even though many people still see insurance like an investment, in reality, there are other real investment options that can make a much bigger difference.
Now, it is true that some forms of life insurance do work for saving money and for retirement investments. In this type of insurances, you build capital and that capital gains interest over time.
The important thing here is how much life insurance you need, and how much money you want to leave for your family. This amount of money that the life insurance policy will pay if you die, depends on many aspects, including:
If you are determined to acquire life insurance, and if you are the only one supporting your family, you need to calculate how much money you bring into the household annually, after that you’ll need a policy payout that equals that amount plus a little extra to protect from inflation.
The internet offers a vast array of online insurance estimators that can help you determine how much insurance you need to safeguard your family.
In case you die, you also need a policy payout that covers debt entirely – credit cards, mortgages, loans etc – plus a little bit more to cover any possible interest.
What other options do I have besides life insurance?
There are other options available for people interested in life insurance merely to cover debts – meaning that there’s no one depending financially on them-, banks are offering insurance deductibles that can be used on outstanding balances. In case you die, the insurance company will pay the debt in full.
If you think you need life insurance then start thinking about how much and what type of life insurance you need.
Also think about insurance that you don’t need that you can make a profit of, just like the thousands of people getting money returned to them from decades ago from the PPI scandal repercussions. Find out if you can make a successful claim in order to receive tax-free money for mis-sold PPI policies.
The government has set 29th August 2019 as the final date to file any claim, so it’s best to get this process out of the way as soon as possible. Reclaim what could be rightfully yours and use the money to pay the debt, remember that having less debt can make the life insurance qualification process more viable.