Life Insurance and Investmentby Bumaco LTD on 06/12/20
By Vicent Kweka
Life insurance is a contract between an insurance policy holder and an insurer, where insurer is supposed to pay sum of money or benefits in exchange for a premium, upon death of an insured person or when policy of insurance matured. Life insurance is the best way to save for future purposes. For instance, you can buy life insurance for the purpose of enhancing your wealth in the future.
There are two fundamental questions for an individual to reflect before purchasing a life insurance. First, an individual must understand why s/he wants a life insurance and second because life is about life an individual should ask himself what if s/he dies how will s/he leave his/her dependents. Further, on the second question an individual should also ask himself what if s/he doesn’t die? Will s/he have enough or secured funding to finance his expenses.
There two main reasons for buying life insurance. First, is protection and second is investment. For the former reason, one buys life insurance to protect his family (dependents) in case of pre-mature death. Related to this, individual can buy life insurance for the purpose of leaving an inheritance, or gift to charity. Thus, life insurance helps to protect beloved ones, institutions or charities from suffering financial hardship in case of unexpected death. For the latter one, life insurance is a form of saving when the policy matures. In addition, life insurance is instrumental for investing in children’s education. Similarly, life insurance is an investment for retirement as well during uncertain times such as when an individual suffers total disability or critical illness.
There are different types of life insurance depending on your lifestyle, family structure, and financial position. In addition, life insurance can be customised to meet your needs. For example, Bumaco Life Insurance offers the following insurance plan which have elements protection and saving. These are endowment plan, anticipated plan, education plan and group endowment. For instance, anticipated plan ranges from 9 years to 25 years. It provides both protection and saving. the policy holder of plan has a chance to benefit three times in a time-covered in the plan. For example, after first three years a policy holder can receive 20% of the benefits. Again, after another period of three years the policy holder can receive another 20% and the rest (60%) can be claimed at the maturity of the policy. Furthermore, the anticipated policy offers the policy holder an option of receiving whole amount in lump sum after maturity of the policy. Similar, to anticipated plan, the endowment plan matures after 10 years or beyond and its benefits are claimed on a lump sum after maturity or upon death.
The challenge with life insurance is that majority think it is only paid when they die and if death doesn't occur, they have lost the premium. This is a misconception. Life insurance is different from general insurance where premium is not recovered when there is no claim. This is the reason why life insurance is also a form of saving. It is saving, because upon maturity of the policy the insured receives the lump sum and its protection because the beneficiaries of the policy receives the sum assured upon death of the policy holder.