By Finbar Garcia, LUTCF, FSS, MFA
Today we are going to talk about Life Insurance and more so after celebrating International Insurance month in September. This event is usually celebrated worldwide and through our local association The Trinidad & Tobago Association of Insurance & Financial Advisers (TTAIFA).
Many persons believe that life insurance is a morbid topic—even to the point that many believe that it’s only based on death—but this is mainly due to the lack of information or misinformation.
The main purpose of having life insurance is to protect your family from any financial hardship due to your untimely passing, but it’s much more than that. Let me break it down into easier steps for better understanding and appreciation.
The concept of life insurance started many years ago as an Industrial Life programme “helping the unfortunate by the pooling of money from the fortunate few”.
This programme was designed to assist families and merchants due to unforeseen circumstances, death the main concern. This stigma continued for many years, where persons believed that death was calling if you took out life insurance.
Life insurance changed many times over the last 300 plus years; some of these changes made it better for persons to invest in life insurance. The idea of having life insurance is to transfer that risk to an insurer.
A very interesting point to note: if you’re a young person “you buy insurance with your health….and you pay for it with money”.
One of the primary underwriting guidelines for processing an application is the client’s health, both past and current. Buying insurance when you are young and in good health guarantees you a lower premium than someone with medical issues and even older, so why wait?
Wanting to acquire that dream home, you would need to seek a mortgage. The financial institution would ask you to furnish them with life insurance coverage equal to the value of the loan you are taking, and if it’s joint like husband and wife, then both individuals need to have the same full coverage. This is in event that whoever dies first, your mortgage is fully paid off.
Having acquired that property and starting your family, you would want the best education for your children. Again, insurance can provide that element of both the savings for education and the peace of mind, in event that you die before your children attains the desired age for further education.
What about your retirement? Having a life insurance policy that accumulates cash savings over the years, commonly referred to as the ‘cash values’, this savings can be used as a lump sum buffer upon your retirement. You can even pay off certain debts prior to your retirement in order to reduce your expenses during these years of limited income.
‘Income Protection’—Insurance can protect it to a point while you are alive if you have an income protection plan during your working years, but the bigger question is protecting your income as the breadwinner in the event of your death.
When you die, your income dies with you, however, your bills and other family-related expenses continue. By protecting your income the way it should be done, you can guarantee that there would be NO financial burden on your family.
Let’s remove the negative thoughts and stigma with life insurance. You’re protecting your loved ones. How many times have we heard or read in the newspapers about a breadwinner’s sudden death leaving the family to anguish to the point that some of the children suffer, not just financially but psychologically. Let’s not do this to our spouse and children.
I will write in more detail the other aspects of life insurance in part 2, ‘The concept of life insurance’.
“Delight yourself in the LORD, and he will give you the desires of your heart” Psalm 34:4
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Here are some of the areas that life insurance can assist you today: