One of the primary pillars of personal financing is life insurance that deserves all the discussion in both personal and public forums. It is the only way one can steer clear of confusion, skepticism, and myths surrounding the risk management tool. Life insurance has universal applicability which makes it all the more deserving of consideration in households all over the globe.
There is a lot of taboo and mistrust surrounding even the best life insurance policies out there. It is disheartening, to say the least on one hand. On the other, it is an understandable human reaction since the concept of ensuring one’s life is a bit morbid. Nonetheless, if you love your family and want to make sure that they are taken care of in your absence, you need to have a life insurance policy on your name.
Now without further ado, let us dive straight into the topic. The following section will try its best to sum up everything you need to know about the tool in brief. Let’s go!
Life insurance doesn’t necessarily mean you are assigning a monetary value to your life
Time and again insurance policies were looked down upon by people since they think one is simply assigning a monetary value to their life once they take out a policy on their name. This is simply not the case since an insurance policy simply helps the family members of the policyholder in case the former lost their life prematurely.
All forms of financial consequences are taken care of by the insurance policy so that the ones that were financially dependent on the policyholder can cope with the loss of their loved one in peace.
All financial liabilities are taken care of by life insurance policies
An insurance policy is a way forward is you have outstanding mortgages, debts and other financial expenses to take care of. In case you lose your life prematurely, these financial liabilities can wreak havoc on the lives of your loved ones. An insurance policy makes sure that this never happens by easing out the financial pressure on your surviving family members.
It is a contract between the policyholder and the insurer company
An insurance policy is a contract between the insurer and the policyholder where the set terms, legally bind the insurer to pay out claims (also known as death benefits) to the family members of the policyholder in case the latter falls prey to premature death.
One may ask how an insurance company benefits from all of this. Well, the answer is simple – the difference between the premiums paid by the insurer during their life and the claim amount paid out to their family member(s) in the event of the policy holder’s death is the profit amount left out for the insurance company.
It is not an investment but an efficient tool for risk management
In recent years, several insurers started adding possible investment features in their insurance policies and related products. One should always keep this in mind that an insurance policy is not an investment medium.
It is never ideal to be considered as an investment medium especially if one is planning to avail tax benefits from it. An insurance policy, by definition, is a risk management tool and should be considered as such.
It is obvious that people don’t like talking about the concept of life insurance policies simply because no one wants to think nor discuss facts about death. With that out of the way, it is wise to accept the fact that open discussions that lead to financial planning for your loved ones in case of an untimely death. This post tried its best to cover all major aspects of life insurance. If you still have doubts of your own, feel free to share them in the comments section below. We will try to get back to you with answers as soon as we can. Thank you for reading.