When you pass away do you want your family to be protected? Do you want the security of knowing your partner and your children are financially secure? Surely this is what everyone wants and the only way to achieve it is through investing in a life insurance policy.
Surprisingly there are still so many people who fail to do this in the modern day. A lot of the time the reason why people do not have life insurance is because of a lack of knowledge. Well, that is exactly what this blog post is here to put right. Read on to find out all you need to know regarding what this type of insurance is and why you need it.
What is life insurance?
First and foremost, it is important to determine what life insurance actually is. This is a contract between you and the insurer in question. The main point is that the insurer will agree to pay out a cash sum if you die during the length of the policy. You will have various policy options and therefore it is essentially up to you when it comes to determining how long you will need the policy for and how much cover you think you will require.
Why do you need life insurance?
It is a must-have for everybody as at ensures your family are protected from any financial worries once you are gone. There are many costs they could endure that you may not think about. This relates to everything from household bills, to funeral costs, to unforeseen medical bills, to mortgage payments, university fees, to childcare costs. When you take all of this into account it is not hard to see why you need life insurance.
What should you consider when looking for life insurance in Hong Kong?
- Can you afford the payments? A lot of people get so sucked in with the cash sum that may be paid out. Because of this, they do not take the time and effort to really assess whether they can afford the payments. You don’t only need to consider the payments today but you need to think about the future as well. There are a lot of policies whereby the payments rise as time goes on.
- How much coverage do you need? This is something that requires a lot of assessment. Obviously the more coverage the better, but it is not as simple as that. The more coverage you seek the more expensive the policy will be. Consider how much income you contribute to the family and how much others depend on you. Don’t just think of dependency in terms of the money you provide. If you look after the children for example, when you die your family would need to fund childcare and therefore this would have to be seen to in the insurance policy.
- Do you want term or whole life insurance? Last but not least, you need to determine whether term or whole life insurance is going to be the best option for you. With GUL companies, they offer policies that feature premiums that will never rise. On the other hand, a term policy is one that has fixed premiums for a set period of time and then they will rise as you get older. These are typically a lot cheaper.
The benefits of buying life insurance sooner rather than later
A lot of people put off buying life insurance for as long as possible. However, there are actually many benefits to be gained by getting this from a young age. Let’s take a look at some of these in a bit more detail…
- Lower insurance costs – If you are young and in good health then you are much more likely to better from favourable terms. In most instances; the younger you are, the lower the cost will be to insure you. If you leave purchasing life insurance until much later in life then there is a higher chance you are going to have health issues and this will compromise the quality of your insurance policy. Lock in your premium now and you don’t have to worry about it increasing in the future – no matter what happens.
- Investment potential – A lot of young investors opt to buy life insurance in order to expand their financial portfolio by incorporating a tax-free investment fund. This is because whole life insurance includes a cash account. A lot of people use this as an investment fund or a savings account. Every policy is obviously different however there are those that present you with the opportunity to earn tax-free interest, bonuses and alike from the cash value of your policy. Furthermore, this value will grow based on the amount of time you hold the policy.
- Be prepared – You never know what is around the corner. You may not have children now, but who is to say you won’t become a young parent? We all like to have our lives planned but it doesn’t always happen the way we expected. By purchasing a life insurance policy early you can be safe in the knowledge that your family will be able to cope financially if anything was to happen to you.
Hopefully, you now have a better understanding regarding life insurance, why it is important, and what to consider. One important thing to remember in all of this is that you are taking out this policy for your loved ones. Nobody likes to think about death and leaving their family and close friends. However, it would be a million times worse to completely ignore this eventuality and leave those you love in potential financial ruin.