How Insurance Can Contribute to Your Financial Health
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It does not matter where you live and what your economic status is, you need to be prepared for your life. Life is uncertain and anything can happen at any moment. No matter what you cannot avert these situations. However, when you have insurance you can at least prepare yourself to handle situations that demand finances. That’s why you need life insurance. When you have life insurance, you can not only get financial compensation for your accidents and illness but also get some cash benefits after your insurance matures. When you have insurance, you have at least cope up with the situations that demands money. Well, life insurance is not the only insurance policy that helps you with finances, there are a lot of other insurance products that can be equally beneficial.
Is Insurance Saving or Investment
Insurance does not look like savings because if nothing happens to your house or car, you cannot claim insurance and the premium you paid will be lost. However, also does not look like an investment as there is no guaranteed return if you are not in a position to make claims.
Interestingly, if you buy term life insurance, it can be some sort of savings. That’s because even when don’t make claims, you will still receive your insurance amount after the period ends. Term life can also be called investment because the return is guaranteed either in terms of financial coverage or by claiming insurance amount.
Well, life insurance is an investment, based on the type of life insurance you have bought, you can either reap the return on your investment (premiums paid for your policy) in your lifetime (if you have bought term life insurance) or upon your death, mostly by your nominee (the whole life insurance policy). When buying a life insurance policy the most important thing to consider is whether you can pay the premiums or not. You will have to pay the premiums for a long time.
Is Insurance an Asset or a Liability?
How would you define insurance? When you buy an insurance policy, are you buying an asset or a liability?
You buy a life insurance policy (term life or whole life). You pay your premium until the stipulated time. During your insured period if you have a terminal illness or encounter an accident, your policy will provide financial coverage. After the maturity, you will get back your insured amount. So, a life insurance policy is definitely an asset because you get back your money along with a bonus all the while getting other insurance benefits.
You buy home insurance or auto insurance. You pay your premium. When something bad happens during the insured period, you get financial coverage. However, if nothing happens, you don’t get anything in return but you will have to renew your policy by paying the premium amount. If you cannot claim coverage because nothing bad happened, this can definitely be a liability, however, since it is coverage against loss and damage it makes sense to pay for insurance.
You need different kinds of insurance policies, however, you cannot buy all insurance policies because buying a lot of insurance policies will put you under a financial burden., Therefore, you will have to choose a few policies that will provide you with maximum protection. So, how do you determine the best insurance policy for yourself? You will have to see what is more important for you. Let's say you are a perfectly healthy individual and you don't visit a doctor multiple times in a year and you don't take any medicine, do you really need health insurance? You can get some coverage through life insurance.
It does not matter how many insurance policies are there and how many policies you know, what actually matters is how many insurance policies you actually need and how many insurance policies you can actually buy. Unless you earn a lot of money, you cannot buy a lot of policies even if you want. That's because paying premiums for insurance policies will come as a financial burden, especially for people who have limited income. Having said that there are a couple of insurance policies that you should buy, for example, life insurance policy, auto insurance (if you own an automobile), home insurance (if you own a home)
How Insurance Can Help You With Your Finances
Some insurance policies are more like saving plans. One such insurance policy that works exactly like a saving scheme is a term life insurance policy. let's say you bought a term life insurance with a maturity period of 25 years. Nothing happens to you during the insured period and you don't make any claims and continue to pay your premiums for 25 years. By the end of the term, you will receive your insured amount. Doesn't this sound like a saving scheme? However, some insurance schemes do not return your money, you can only get the coverage, you will have to forget about the premiums if you don't claim coverage.
Term life insurance policy is a policy that provides financial coverage against accidents and terminal illness. Let’s say you had an accident and you lost your limbs, you can get financial coverage from your Term Life Insurance. Or, let say you are diagnosed with terminal illness, you will get financial coverage for illness. If you do not encounter any accidents, do not get any terminal illness, you can receive your insured amount after the maturity of your policy. Well, these are not the only benefits of term life insurance. There are two major benefits:
Saving scheme: You need to save money to improve your finances. However, if you have limited income, you might not be able to save money. In that case, term life insurance will come handy. If you buy term life insurance with 20 years maturity period, you will be paying premiums for 20 years and when the policy matures, you will receive your insured amount. You will also receive additional bonus. You managed to save a lot of money without actually saving.
Retirement scheme: Buying a term life insurance policy is also way to save money for old age, or build a retirement funds, to be precise. If your employer does not give you retirement benefits, you can pay premiums for term life for 20-25 years and by the time you retire from your work you will have your own retirement funds.How
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