Life insurance happens to be one of the widely purchased financial products of all times. It is important that every individual checks to weigh the advantages and disadvantages of purchasing different life insurance policies such as the whole life policy or the term life insurance policy. That way a client will be able to make a wise informed decision on whether or not to buy life insurance and also which policy would be most appropriate for him/her. Most insurance companies will not provide adequate information to their clients about the pros and cons for different life insurance policies so let’s now have a look at some of the advantages and disadvantages of life insurance.
Life insurance is an expense that will pay off when you are dead. By purchasing life insurance you are guaranteed that upon your death, your dependants will lead a decent life without you. This is the biggest advantage for life insurance.
Tax advantage comes in because in most countries, you will be able to pay premiums for your life insurance in your taxable income. The other advantage relating to tax is the fact that the amount payable upon maturity is not taxable. You can use life insurance to lighten your tax burden.
Term insurance is the best life insurance policy because it is simple and cheap. It will simply provide a lump sum in the event of death without attaching too many conditions and complicated clauses. It is the simplest to understand.
Life insurance cover is flexible. Most life insurance policies are meant to cover you until you have raised enough to cater for your family in the event of your demise. This means that if you only have say $50,000 in your savings and need $450,000 more for your family to be covered upon your death, if you choose to pay premiums of $50,000 every moth then you will only need to make the premium payments for only 9 years and your dependants will be safe. It does not need to be a lifetime of paying insurance premiums.
Since the insurance industry is carefully regulated by the government, you are guaranteed that if you meet your death today, the government will ensure that your dependants are paid all that is due to them in relation to your life insurance policy.
The greatest disadvantage of a life insurance occurs where life insurance is used as an investment plan. Insurance companies have been indirectly promoting this notion among clients that because one pays premiums, then they are eligible to get something in return which is not always the case.
It is very possible that one would get caught up in what other are doing and consider doing it too. This has led many people into buying insurance even when they do not need it. For instance an elderly single woman who is say 80 years old does not need to buy life insurance.
One may be led into the trap of buying complex life insurance plans that may cost a lot of money but not give returns that are as high. It has been proven that millions of people buy insurance plans without having understood the products.
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There is without a doubt a lot of information that is out there in regards to insurance