Life insurance is a process of making advance provision for financial needs that will arise in the future. The objective is to ensure that the right amount of money is available in the right hands at the right point in the future to achieve an individual’s financial objectives.
For example, it may be necessary to save for many years to create an adequate income in retirement. Parents may feel the need to make financial provision for their family if either dies young. Equally, people who are already wealthy may need to take financial planning steps now to ensure that their assets, including family businesses, pass without difficulty or additional charges from taxation to their, chosen heirs.
Benefits Of Life Insurance
Life insurance is protection against financial loss that would result from the premature death of an insured person. The beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured. The death benefit is paid by a life insurer in consideration for premium payments made by the insured.
Provision of family income in the event of the income provider’s illness or death
Accumulation, preservation and investment of wealth
Survival of businesses from one generation to another
Some life assurance policies are designed to meet temporary / short term life cover needs. A term assurance policy provides protection during the fixed policy term ranging from a minimum of 5 years to a maximum of 35 years. There is no investment or saving element as the core purpose would be for pure protection. Such policies usually come with monthly or yearly premium payment options and premiums are paid throughout the term of the policy.
Whole of Life plan
The plan term is open ended, hence continues throughout the lifetime of the life assured. The sum assured is payable on the life assured’s death. Here the premiums could be paid monthly, quarterly, half yearly or yearly for as little as 7 years and as long as whole of life. These plans usually contain an investment element, and will provide increased cash value alongside funding for the cost of future benefits throughout the life of the insured. Protection benefits would be the prominent benefit under this plan.