Skip to main content

Why Do You Need Life Insurance?

One of the most misunderstood financial management tools is insurance, especially Life insurance. Most of what people have as life insurance was probably set up by parents, the employer or other authority figures our lives set.

Whenever most of us are approached to take up a life insurance cover, we react by asking how much we will make from it in comparison to other instruments say, Money Market Funds or Treasury Bills. In some cases, we even wonder why a policy taken out on our lives does not pay us back if we survive to the full agreed term of the contract.

What really is Life Insurance for?

Most life insurance products have three components. First, and most importantly the protection aspect. A life insurance cover is designed to pay out for the uncertainties, such as the unfortunate death or disability of the insured person. This important characteristic ensures that one’s beneficiaries have a lifeline in case the bread winner passes away or is incapacitated to the extent that their performance is hampered. Often, this is the most unique feature of a life insurance policy that the other financial instruments do not have. Its value cannot be compared to any other, it is difficult o quantify the contribution of the peace of mind that the policy holder or their beneficiaries derive from getting a timely compensation. Remember, even if one has paid for a few months, the full amount is eventually payable to beneficiaries in the evet the agreed upon event, such as death, occurs.

Secondly, most education covers – such as the Geminia Edmaster – and endowment policies, usually attract a bonus during the policy or at the end of the term (also called maturity). This investment angle protects your payments against erosion in value because of inflation. In other words, you get much more than you put in. Some policies are structured to invest whatever is in excess of premiums for very competitive returns such as TwinSave.

Thirdly, even for those that do not offer investment returns, any life insurance product is a savings solution. It preserves one’s money for the days when they need it the most.

If you have read this and would like to get a better understanding of how a life insurance product can come in handy in the three areas, click here to schedule a call with us.