Growth & Jobs | Life insurance an essential part of financial planning – general manager
“Having life insurance should be a sound part of any financial plan, as it provides social protection to individuals. And,it can be used as long-term savings; retirement planning; and assist in withstanding financial shocks,” says Hugh Reid, general manager, JN Life Insurance Company.
Reid stated that while there has been a steady growth in the number of insurance premiums over the years, many Jamaicans still do not understand the benefit which life insurance can provide when it comes to financial planning.
“Many Jamaicans still believe that insurance is expensive, and is only for a small fraction of the people in our society. Most persons believe that one only needs it in the event of death. However, it is a valuable asset, which can be used by individual persons and companies to manage their risk exposure.”
The insurance executive said that products such as life and critical illness insurance are also essential elements in mortgage agreements; and they benefit the insured’s family in the event of an unfortunate occurrence, such as death or life-changing illness.
“Regardless of your income, life insurance helps you to withstand economic shocks in the event of a major illness or death of a loved one,” he said. “This is important on a national basis, as it eases the burden on government and non-governmental organisations to offer financial relief.”
Reid added that insurance is important for small business owners as well, because ‘key person’ insurance protects the operator of the business in the event of misfortune.
“A few years ago, we recognised that in the event of death or any of life’s eventualities, many micro or small business operators, or their families, would be left to bear the burden of a loan obligation. What we did was to develop a Single Premium Creditor Life product for small business operators, who needed to take out loans to grow their operations,” he stated.
“The insurance coverage is available until the loan is settled,” he said. “This means that if a client becomes ill or otherwise incapacitated, the insurance will enable clients to honour their commitments without a major challenge.”
The general manager pointed out that life insurance was also beneficial in terms of being used for long-term savings, estate planning and retirement.
“The funds accumulated over time can also be used to supplement income, settle obligations, and enable loved ones to survive when the insured has passed away,” he said. “You can also purchase simplified issue whole life policies, which help to deal with your final arrangements, settle estate taxes and assist families. Having life insurance is an essential part of financial planning.”
IMPORTANT PART OF FINANCIAL PLANNING
Rose Miller, grants manager, JN Foundation, added that life insurance should be considered an important part of financial planning, because it has the ability to create, preserve and transfer wealth.
“Life insurance gives you the option to leave a legacy for your family. It acts as a safety net hedging against events such as sudden illness or death, resulting in loss of income,” she explained.
“The appropriate plan also allows you to invest regularly, growing your wealth via funds which are professional managed, while at the same time obtaining life coverage in the unfortunate event that persons pass on prematurely; double benefit for the insured’s beneficiary. It is also worthy to note that proceeds from insurance is not taxed,” she added.
She also added that life insurance helps persons to recover financially in the event of critical illness or death.
“Insurance is that tool which will help you to recover from unforeseen situations, and ensure that all your savings or investments are not used up to get you back on your feet. You can pay premiums incrementally; therefore, you are ready for these eventualities. Yes, you might be able to cover these costs out of pocket or get a loan; however, if you have insurance you would not need to go that route, as the funds would be there to offset the costs, preserving your cash,” she explained.