Why Should I Buy a Life Insurance Plan?
When it comes to financial decisions of our lives, buying life insurance is amongst the important ones. But the question is- What makes it this important?
No matter how much you are earning, you can never predict the future. Every year, many people pass away prematurely due to accidents or diseases. And if these people were the only breadwinners in their respective families, then it may cause devastating consequences to their loved ones. Their dependents might become incapable of paying debts, daily household expenses, and maintaining their living standard.
So, if you are also a sole breadwinner of your family, then the best thing you can do for them is to protect their financial future by investing in life insurance in UAE.
Not only this, but there are also many other benefits of life insurance plans during your life span, especially at a young age. Here are some of the compelling reasons for you to invest in a life coverage plan.
1. Meeting Long-Term Objectives
Since life insurance is a tool, which keeps you invested for a long duration, it can help you in meeting your long-term objectives like retirement planning, purchasing a house, and more. It will also offer you various investment options, which come with different kinds of policies.
Some of the plans are attached to investment tools that offer dividends on the basis of their performance. Make sure you go through the fine print carefully if you plan to buy an investment-linked plan so that the potential returns and risks are in your knowledge.
2. Taking Care of your Dependents
The most essential aspect of life insurance plans is taking care of the dependents even after the insured passes away. While buying coverage, this is one aspect you must factor in. Your loved ones will be dependent on you even after you are gone and you would not want to leave them unprotected.
Life insurance can save your dependents from financial crises such as replacement of lost income, making payment for your kid’s education, or ensuring the financial security of your spouse even in your absence.
3. A Support for your Retirement Planning
Who would not love to have savings for their retirement to last till the time they do? A life insurance policy can help you ensure that you have a regular income every month. Investing your dirhams in an annuity is like having a pension plan. You put in some funds regularly in a life cover and in return enjoy a stable stream of income monthly even after you retire.
4. Your Debts are Taken Care of
You would not want your beloved family to get stuck with financial liabilities at the time of a crisis. Any debt outstanding, such as car loan, loans on credit cards, home loan, or personal loan, will be dealt with even when you are not around if you have invested in a suitable life coverage plan.
5. Your Business will be Taken Care of Too
Life insurance is not limited to you and your family. Some of the life insurance plans also help you in taking care of the business. If you’re an owner of a business, then your partner can buy your share of the business easily.
Your business partner/partners will have to sign a buy-sell contract and the amount of payout will be transferred to the nominees of the deceased partner. However, the latter will not have any stakes in the company. Life cover plans are of different kinds, term life insurance and whole life insurance being most common of them.
Most of you must be aware of death benefits offered on these policies, but you may not have a detailed knowledge of the options laid out by them, which could help in strengthening your financial condition.
A term plan offers protection for a particular time duration (pre-defined) and pays out the death benefit only if the demise of the policyholder happened within the policy term. In case the policyholder outlives the policy, the policy expires and the coverage ends.
Alternatively, an investment-cum insurance policy offers a lump sum amount to the policyholder on the completion of the policy term. Such plans also offer protection; however, the coverage is generally lower as compared to term insurance plans.
6. An Instrument for Savings
If you buy a unit-linked or traditional plan, you will have to pay a premium every month that is higher as compared to what insurance costs. This extra amount of money gets invested and cash value is accrued on it. You can borrow this cash against your policy, or you can draw income from it, or sell it.
7. Insurance prices are lower at a Young Age
Every millennial does not need an insurance plan. In case you haven’t started an emergency or contingency fund or you still ask your parents for money, life insurance may not be a priority for you.
However, in case you have dependents in your family or you and your parents have co-signed a loan, no matter a home loan or a student loan, you must start planning to buy life insurance. Also, the costs of coverage are comparatively low while you are single.
Make sure you do not invest in a policy you don’t need. So, do research well or consult a financial planner for determining the amount of insurance you need, keeping in mind the other assets you own. If you are single, you may still have other dependents such as siblings and parents. You must make sure that they are taken care of.
The sooner you buy insurance, the better. For example, people who are single give financial support to their old parents or a sibling who has special needs. Insurability is also a reason for considering life insurance plans when you’re single. For young, healthy people who have a good history of family health, the insurability is very high and hence, they can avail of the best rates on your insurance policy.
8. You May Not Get a Qualification Later
Your life coverage plans are based on uncertainties. Presently, you may be healthy, and making payment of a premium on your life insurance may look like a financial burden. However, if you fall ill suddenly, you may not be able to buy a life insurance plan.
Hence, it is important to buy insurance early in life as it will keep you covered when your health deteriorates in life later. Insurance providers allow you to add some riders or benefits to the new or existing plan.
These add-ons improve insurance quality. For instance, the accelerated death benefit add-on lets the policyholder avail some parts or all parts of the death benefit of the policy if his/her remaining life span is short because of a critical illness, or he/she wishes to use the money for treatment or related expenses.
9. Mental Peace
Death is an inevitable truth of life. At the time of tragedy, the best thing you can do for your loved ones is to protect their financial future. Even in the case of you investing in a small policy; you are at least at peace thinking you have done your bit for helping them in their tough times when you are not around.
Life insurance plans are a great tool for protection as well as for helping you in saving with a discipline that leads to the creation of a decent corpus. The requirement for a life cover may change at various stages of the life cycle, keeping in mind the financial liabilities and the dependencies.
If you are still young and think that life cover is something you can wander about in the future when you grow older, then it’s time to wake up and realize it is nothing but a myth.