The importance of life insurance

Life insurance offers financial security to help your family or business to cope in the event of an unforeseen tragedy. Life insurance is a necessity for anyone who is depended upon for financial support or is the primary earning member.

Most life insurance policies have common features such as making payments to the insurance firm for an agreed period of time, called premiums. In the event of your death, the insurance company pays a death benefit to your beneficiaries. Since most people depend on their income completely, it is advisable to purchase insurance cover that is the equivalent of anywhere between 5 and 8 times your yearly income. Your accurate requirement for cover will depend on your financial assets and liabilities.

The primary functions of life insurance are -

- Provide financial protection for your loved ones.
- Provision to pay your home mortgage,
- Attend to your estate planning needs
- Consider other options for retirement savings/income vehicles.

Short-term and long-term benefits

In the event of your death, in short term benefits, your loved ones may need to adapt to a new lifestyle, covered by the benefit, as well as to pay for the costs mentioned above. Long Term Care insurance helps pay for the maintenance and care of a long-lasting disease or disabled individual. In business, life insurance can assist a business to survive against the death of a key person by providing a source of financial assistance by covering the costs of recruiting and training a replacement.