Insured For Life:

Filed Under Finance |

by John Dale

Life insurance is a gift to those we care about the most. When we are no longer there to provide for our family, we can still make sure that our loved ones are cared for and can still live and thrive even when we can no longer be there to provide the money that we otherwise would provide for our families. Imagine how you would feel if your children could not go to university because the money was not available, or our family could not continue to live in their home because we are no longer there to provide the financial support they need and you can start to see why life insurance is so necessary.

There are broadly two major types of life insurance policy commonly available. Term life insurance is the cheapest form of insurance but has a limit, the term of the policy, for which it will provide protection. Whole of life insurance policies provide protection for our entire life irrespective of how long we may live and so they are vitally important for any financial protection plans that we set up.

Sometimes the whole life insurance bonds itself with investment fund; it is linked with the policy itself. In previous years some kind of premium was also paid with the lifetime insurance with some of it allocated to the investment fund. The policy starts building its own value as cash. Such funds can be used for premiums to be maintained in coming years and can be used in emergency. It provides financial assistance to holder of the policy whenever he/she needs it.

Typically, in the early years when the policy holder is younger, insurance costs are relatively low. As the policy holder ages, the insurance cover cost rises and premiums may be forced to increase. At some point the policy holder will be confronted with a stark choice of reducing the level of life insurance cover or paying the extra premium. If the extra premium cannot be paid, then the cover must be reduced unless the premium can be found from another source.

This is where the investment element comes into its own. The investment fund can be used to supplement premiums paid by the insured to ensure that even though the cost of insurance cover has increased, the cover can be maintained at no extra cost to the policy holder. In some instances, premiums can cease being paid by the insured policy holder as the cost can be covered from the investment fund alone.

It should be ensured that an amount is available for use after you death to pay taxes or take care of urgent needs for instance inheritance tax is generally a payment that your loved ones has to pay after your death. Whole life Insurance policy makes sure that these taxes are paid through your funds. This ensures that your estate and other properties are released to your loved ones after paying the tax man.

Whole of life insurance contracts are very flexible policies providing a wide range of options. The ability to take premium holidays is available because there is an investment fund available to continue cover. The investment fund belongs to the policy holder so if there is a need for emergency funds or collateral to secure a loan or mortgage, extra avenues are open to the policy holder that are simply not provided by other non-investment based insurance contracts.

Taking the time to understand how a whole of life contract works and how it can secure your family’s future is an extremely good idea. Once you have grasped that there are two components, the insurance cover and the investment fund, they become rather simpler to understand. Understanding how to protect your family is key if you are serious about ensuring that your family will continue to enjoy the financial security you provide for them today.

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