Gulf News July 4, 2009
04 July 2009
Gulf News: Insurance is key to better life planning
Like most people at present Im strapped for cash as a result of the global downturn. But people keep telling me to get some life insurance, why is it important? To me it just seems like dead cash.
Seeing colleagues and friends suffer financially as a result of the downturn has served as a stark warning to others that financial health and well being is an important element to the overall quality of life.
Now, is a good time get personal finances in order. Pay off those outstanding credit card debts, reduce out -goings to a minimum, and make sure you are saving enough for your children’s education and your own retirement, which comes around a lot more quickly than you think.
Another important investment to consider is life insurance. Obviously the main point for setting a policy up is to ensure that when you die your loved ones will be able to retain the same standard of living.
But there are many more benefits to having life insurance than that. It also offers a great way of saving! When needed life insurance policies can be cashed in, normally after an agreed amount of time.
The bottom line is that life insurance is an investment, it is not dead money. You can use it to guarantee other debts such as a mortgage or bank loan, or as a guarantee to creditors that you can pay. It is an asset that can be used as you want.
Of course the longer you pay into a policy the better the return, if you don’t die. If you have been investing regularly and your policy the return after 10 years will be far greater than after 18 months of savings, as the insurers have to cover their own risk that you could die sooner rather than later.
The amount you receive at the end of the day – whenever you choose that to be - also depends on your own risk profile. Your independent financial advisor will carry out a quick risk assessment test before advising which life insurance policy is best for you.
There is a range of policies available which can suit your attitude to financial risk, ranging from a guaranteed return to a policy which offers a much higher potential return on your investment but with higher levels of risk.
Insurance policies have been used for over a hundred years as a savings vehicle and have also provided valuable and much needed protection to loved ones in the sad event of a death. All too often the value of purchasing protection only becomes evident when it is too late.
It is however never too late to start saving!
By William Hewitt, chartered financial planner and district manager at Nexus.