Life Insurance: a necessary caution
When planning for retirement, we tend to focus solely on pension and investments. Often life insurance is viewed as an optional expense. But in today’s uncertain world we face rapidly changing global circumstances, economic instability, and ever unpredictable health risks. All these factors emphasize a need to secure financial protection for our families should we pass away – and life insurance emerges as a key financial safety net able to safeguard dependents while offering the stability they will need to navigate a complex world.
Financial security for loved ones
- The primary purpose of life insurance is to offer financial support to beneficiaries in the event of the policyholder’s death. With rising living costs, healthcare expenses, and education fees, families need to plan around the possible death of a breadwinner.
- Life insurance is key in that plan; it is devised to ensure a payout able cover daily expenses, help children pursue their education, and provide for dependents’ essential needs without disruption.
- This financial security is particularly crucial in single-income households or situations where one partner is primarily responsible for earning the family’s income.
- Economic uncertainty makes life insurance more than just a future safeguard; it serves as a hedge against sudden, unforeseen financial stress.
Supporting dependents and their future
For families with young children, life insurance is essential for supporting their growth and future. You will already be aware that raising children requires a substantial financial investment in education, extracurricular activities, healthcare, and basic living expenses. The value of life insurance lies in that there will be funds assured to cover these costs in the unfortunate event of one or both parents passing.
Debt coverage
Debt can leave as bigger problem when you die, as it presented during your lifetime. From bonds and personal loans to credit cards – your family could be left with serious financial obligations. Debt does not disappear with death. Without life insurance, dependents may have to sell assets, withdraw from savings, or take on other financial obligations to meet unpaid debts that you leave behind. A large bond can leave family members at risk of losing their home if they are unable to cover the monthly payments. This aspect of life insurance is crucial for families, providing a way to protect their most significant assets and avoiding the financial and emotional upheaval of relocating.
Income replacement for spouses or elderly dependents
There are many households where only one spouse works, or where elderly parents are being taken care of by one income earner. If a steady income is suddenly taken away, these dependents who may have no other means of support, will face difficulties in covering essential expenses. Life insurance allows families to continue their lifestyle and meet these needs without having to make significant lifestyle adjustments.
Life insurance as an investment and savings tool
Certain types of life insurance policies, such as Whole life or Universal life insurance, offer both a death benefit and a cash value component. This cash value can be accessed through loans or withdrawals during the policyholder’s lifetime. If not used, it can substantially increase your retirement income. But during uncertain financial times, this additional source of savings can act as a fallback for emergencies.
The health question
Moreover, some life insurance policies offer benefits while the policyholder is still alive. Many insurers now provide ‘living benefits’, which allow individuals with terminal illnesses to access part of the death benefit while still alive, easing the burden of medical bills and treatment costs.
Estate planning and business interests
For those with substantial estates or business interests, life insurance can serve as an estate-planning tool, ensuring that heirs receive a certain amount while minimising potential tax burdens. Likewise, business owners can also use life insurance policies to protect their business continuity, offering buy-sell agreements or key person insurance to support their employees and maintain the stability of their company.
Life insurance as part of a comprehensive financial plan
Without a doubt, life insurance is an essential component of a comprehensive financial plan. Many financial planners recommend life insurance as part of a well-rounded approach to managing assets, providing an additional layer of security that complements retirement savings, investments, and emergency funds. Unlike other types of investments, life insurance is often tax-free and can be structured to protect assets from estate taxes, making it a highly efficient way to transfer wealth.
Empfin Solutions – the team that keeps your team happy
We’re an Old Mutual franchise with our primary focus on the three main areas of concern in everybody’s financial planning:
- Your Company Benefits – advising on, and servicing umbrella pension and provident funds.
- Your Personal Financial Planning and Provision – Estate planning, Wealth Creation and Retirement Planning.
- Your Assets – motor and household insurance.
Always striving to be a trusted partner in facilitating financial solutions for organisations and individuals, our dedicated team of fully accredited, experienced professionals have a passion for satisfying customer needs and providing a truly client-centric service.
Find out how you can benefit at: www.empfinsolutions.co.za
###
