There are many uses of life insurance benefits that many insurance consumers are clueless about, that offer protection to a variety of things that are directly uninsured.
In Kenya, there is a low uptake of life insurance products due to certain common beliefs about life insurance. However, given the lack of knowledge about life insurance, it is my understanding that many consumers believe that life insurance is used for funding living expenses, replacing the income of a breadwinner or simply covering funeral expenses. However, there are many other uses of life insurance that you might consider when planning for your finances and they are:
One: Debt & Mortgage
With a sizable amount of cash value on your life insurance, you can take out a loan against your policy or pay a debt. Insurance companies can offer cash-value loans at an interest rate that is much lower than banks. However, please note that the value borrowed and interest will be deducted from the death benefits when you die before paying out the entire loan amount.
Additionally, it can also be used to pay off a mortgage balloon payment or pay off a mortgage upon the death of the mortgage taker. In this way, life insurance can be used to protect family when a key member of the family unexpectedly dies.
Two: Covering Education Costs
In life, you will probably have times when large expenses are unavoidable. Commonly, expenses arising from paying for college or high-school fees for your children. There are some products that product makers have created products specifically. These products are specifically designed to meet these needs which go a long way to reduce or eliminate the burden of such expenses when the time comes.
Three: Income Replacement
Aside from the traditional means of replacing the income of a breadwinner. Life insurance is also used accumulate cash a value which can be used to provide extra income upon retirement.
Four: Monies Gifted
Traditionally, life insurance has also been known to store wealth for loved ones and the causes people care about. The lump sum of money is transferred to loved ones or causes upon the death of the insured. This amount is tax-free making it a great vehicle to take care of the people and things you care about.
Five: Payless Tax
Unfortunately, we adults cannot avoid parting with some of our income to the government every year. However, knowing the ways to pay less tax could save you a lot in the long run. Life insurance is one tool you can use to effectively store wealth, reduce your tax bill and meet your financial goals all at the same time.
So many Kenyans are still grappling with how to achieve long-term financial security yet overlooking one of the most critical tools to meet that goal – Life insurance. This is as a result of lack of full understanding of all the ways life insurance can be used to provide financial security. There are many types of life insurance – make sure you educate yourself before taking on a policy to ensure you get the best for you. It is unfortunate that life insurance is viewed as merely single utility product when it has a varied number of uses to cater to a very wide range of needs. With some creativity and planning, it can be extremely useful in achieving long-term financial security.
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