Benefits of Life Insurance to Individuals and Families - Free Essay Example

Insurance is defined as a contract between a policyholder and an insurer where the insurer agrees to compensate the insured risks that may occur due to the insured losses. Life insurance offers death benefits upon the death of the policyholder. The basic types of life insurance are term insurance, whole life insurance, and universal life insurance. Whole life insurance offers protection as long as the insured is alive while the term insurance provides life coverage for a specified period. Life insurance is essential as it allows for coverage for the lives of family members and individuals.

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Life insurance enables one to protect his/her family. This is a typical case where the family depends on the income of the family head. Once the family head dies, the life insurance acts as his/her replacement. For instance, a young family consisting of small kids and life insurance can be significant in supporting the children if they die. Life insurance also helps families and individuals pay for debts and other expenses incurred in daily living. Some of the debts that a family needs to take care of include car loans, mortgages, and credit cards. In cases where the deceased has left hospital bills, life insurance can cater to such bills.

Moreover, the burial process usually needs a lot of funds to ensure that it is effectively planned. In case the family head feels that he does not have assets to pass to his/her heirs, life insurance is a better alternative. This further ensures that the children have a strong financial standing in the case related monetary issues arise.

Life insurance also increases one's financial security. For instance, the benefits of term insurance begin after the end of the agreed time. Therefore, an individual or family can decide to use such funds to carry out their projects. In this case, life insurance assumes the role of a savings account. Some people have adopted the practice of using term insurance as a saving to boost their financial security. Lastly, life insurance contributes to bringing peace of mind. Due to the fact that we don't know when we are expecting to die, it is usually better to know that we will not leave out a burden to the living when we die. Moreover, parents need to have a life insurance scheme to be sure that their children will not suffer property and suffering if they die. Providing protection to the uncertainties that may happen in the future ensures that people attain peace of mind.

Benefits Of Whole Life Insurance To Clients

One of the main benefits of whole life insurance is that it does not have an expiry date. This particular policy guarantees the policyholder that regardless of when he/she will die, the death benefits will be paid. This specific type of policy is relevant to family heads who may need to leave behind their family's benefits. Another benefit that the whole-life policy offers to the clients is the fixed rate of premiums. Unlike other types of policies, the premiums in whole life insurance are usually fixed. This provides an assurance to the policyholder that he/she will not expect a rise in the value of the premiums despite economic fluctuations such as inflation.

The accumulation of cash value is very advantageous to individuals who have opted to use the whole life insurance policy. This money is usually accessible at any moment, and thus, it can help the policyholders in carrying out their financial projects. Most insurance organizations also pay dividends to whole-life policyholders. This amount of money can be used to carry out personal projects and can also be reinvested in the same insurance scheme. This enhances the quick accumulation of funds initially invested.

Various tax advantages are associated with the whole life insurance policy. First, the insurer's death benefit to beneficiaries after the death of the policyholder is usually tax-free. The cash value growth and the growth in the reinvested dividends are usually not taxed. This ensures a fast accumulation of the money invested in the whole life insurance policy. Like any other form of insurance policy, the life insurance policy also creates an assurance for the protection of future life uncertainties. For example, parents are assured that such funds can be used to cater to their children's educational needs in case they are gone. It thus provides peace of mind to the policyholder as he/she knows that his family or loved ones are protected in case his status fails.

Benefits of Term Insurance To Clients

We are all in a world full of uncertainties where one knows how long one will live. Life is not predictable. However, despite this fact, no person expects his/her goals to be jeopardized by the aspect of death. On such occasions, term insurance steps in to offer coverage to your family or loved ones. The purpose of term insurance is to protect life for a specified time. If the insured dies within the specified period, the insurance company provides a lump sum to the specified nominee. Term insurance offers a high cost of coverage for a lesser amount of money.

Term insurance is very simple and affordable. One of the main reasons that have contributed to the popularity of the term insurance is its simplicity. The process involving the registration and the payment of premiums for term insurance does not involve a complicated and tedious process. The policyholder only needs to be sure that the premiums are paid on time. The term insurance scheme is usually very cheap. In most cases, the premiums paid constitute 0.1 of the total amount of the sum assured. This ensures that more people can easily subscribe to its services.

Term insurance schemes usually offer higher coverage as compared to the existing ones. This ensures that the policyholders can accumulate a large amount of income over a relatively shorter period. Studies have proved that the benefits reaped from a term insurance scheme are almost 60 times more than the existing schemes. Tax benefits usually accompany term insurance. One of the main reasons for acquiring the term insurance is to offer protection to the family in case of future uncertainties. Lastly, most insurance companies offer level premiums during the duration of the insurance plan. Moreover, the insurance scheme offers a saving plan from which the beneficiaries can carry out their projects. Just like other types of insurance schemes, term insurance also protects future life uncertainties.

References

Guide to life insurance. (n.d.). Investopedia. https://www.investopedia.com/terms/l/lifeinsurance.asp

What is whole life insurance? (n.d.). Investopedia. https://www.investopedia.com/terms/w/wholelife.aspLife insurance. (2016, November 11). Pacific Group. https://pacific-group.co.ke/life-insurance/