Friday - - Advice -

QI want to take out life in­sur­ance. But I’m wor­ried about what would hap­pen if I were to lose my job and couldn’t af­ford my pre­mium pay­ments. Would I lose all my money?

ALife in­sur­ance comes in two types – term or per­ma­nent, which is for the whole of life. The first pro­vides pro­tec­tion cov­er­age for a spec­i­fied pe­riod and then the cov­er­age ceases. Per­ma­nent in­sur­ance is long-term cover that stretches to the age of 85 – or be­yond – and a pol­icy can ma­ture or be cashed in for its sur­ren­der value.

Term in­sur­ance is sim­i­lar to rent­ing – at the end of the term you do not re­ceive any re­fund, while per­ma­nent is like buy­ing a prop­erty on in­stal­ments – af­ter a pe­riod of time eq­uity ac­cu­mu­lated may equal or ex­ceed the in­stal­ments paid. What you choose to buy de­pends on life in­sur­ance needs, af­ford­abil­ity and sus­tain­abil­ity.

If for what­ever rea­son you may not be able to con­tinue pre­mium pay­ments, a term pol­icy will lapse and cov­er­age will cease; a per­ma­nent plan may have some eq­uity that will carry the pol­icy for­ward un­til such time that you are able to re­sume pay­ments.

Life in­sur­ance is bought to pro­vide fi­nan­cial se­cu­rity to de­pen­dents in the event of your pre­ma­ture death and pro­vide cash in the event of dis­abil­ity or crit­i­cal ill­ness. As such, los­ing all of your money is not an is­sue as the ben­e­fits – if a claim is trig­gered – are worth many mul­ti­ples of the premi­ums paid. Pro­tec­tion is the pri­mary con­cern; re­turn of your pre­mium is sec­ondary.

It is best to meet with an in­sur­ance con­sul­tant who can rec­om­mend the best life in­sur­ance so­lu­tion based on your fi­nances and af­ford­abil­ity.

Tarun Khanna is CEO of Nexus In­sur­ance and has over 18 years of ex­pe­ri­ence in the fi­nan­cial sec­tor

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