Most individuals and households tend to delay or avoid taking out life policies simply because discussions on life cover tend to revolve around the topic of death. Further, certain groups in society may also be uncomfortable discussing about death and may not even see the need to have a life policy. In my view, this could also be the same reason why the average person in Zimbabwe does not even think of writing a will.
It is interesting that one of Steve Job’s famous quotes is, “No one wants to die. Even people who want to go to heaven don’t want to die to get there”. Now, if no one wants to die, how will they even plan for their death or leaving behind their loved ones?
Yes, it is indeed a tough topic but the fact is that we cannot predict or sometimes prevent unfortunate events such as sickness, accidents, death or theft. If not managed, these events can have a significant impact on the financial well-being of our loved ones. Insurance is a means of protection from such financial loss. It helps people to hedge against the risk of a contingent or uncertain loss.
Life insurance provides a monetary benefit to a life insured’s family or other designated beneficiary, and may specifically provide for income for funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity/death income benefit.
The death income benefit
The death Income benefit pays a monthly income to your dependents in the event of your death.
Why take the Death income benefit?
- A monthly payment rather than a lump sum benefit will give you the peace of mind that the provision for your dependents is enough and will not run out;
- You can remove the burden for your dependents to have the financial responsibility of investing and managing a lump sum while coping with your death;
- The income payments are payable until you would have turned a certain age, which is selected upfront; and
- In most cases, the benefit pays out tax-free, even though it may be payable over the long term.
The impact of taxes and any fees should always be considered when choosing life policies
That said, the good news is that a life policy has more uses other than hedging against losses associated with death. A life policy is a very important financial instrument in the banking and finance world as it serves as security on loans. Further, individuals can use life policies to save by adding the cash-benefit to their plan. With this benefit, the plan-holder will receive a cash-back after a specified number of years. There is also an option to receive a full lump-sum or to roll-over the investment for another term.
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