Loans and Insurance Policies – Knowing Your Options
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Posted On :
Oct-05-2009
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Article Word Count :
541
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When it comes to savings, insurance policies and loans, determining the options available to you is quite necessary. There are different selections you can choose from which may or may not apply to a particular situation you are dealing with at present and in the future.
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When it comes to savings, insurance policies and loans, determining the options available to you is quite necessary. There are different selections you can choose from which may or may not apply to a particular situation you are dealing with at present and in the future. So what are the basic things that you need to know?
Life Insurance, or is it Assurance?
If there is one subject guaranteed to sow the seeds of uncertainty and tangle the investor in the weeds of confusion, it is life insurance. Or is that “assurance”? These two are the same and the names are often designed to confuse. Traditionally, a company insures a thing because you might never collect, while life assurance is on a person because one is assured to die. The variety of products available today originated from pure life insurance policies. It started with the term assurance which is a policy arranged for a fixed period to pay out a fixed sum. This entails that if you die during that time, it pays. If you don’t it doesn’t.
Meanwhile, whole life policies are generally more expensive to buy but not only provide insurance for your family in case of death, but a major part of the premium is being invested on your behalf. Typically this kind of policy will guarantee an annual rate of return to the individual over the life of the policy. Through this type of scheme you are building up money and during your life you can use this policy as collateral against a mortgage, for example.
Is Life Insurance Necessary?
The key here is to look before you leap. Many of those buying policies are unclear of what they have let themselves in for. Any policy which is guaranteeing you an annuity has to either limit or deny the policy holder any say in which funds their money should be invested. Often the sum guaranteed is only just above bank interest rates and will only be pushed further when the insurance company pays out further dividends from its managed funds. So one must ask again what advantage is there to life policies. Charges are much higher than savings policies through investment funds and an independent insurance policy. But there are advantages for people who are investing a large lump sum.
Security for a Loan
So if you are wondering whether you need life insurance then consider your situation. If you have no liabilities or beneficiaries therefore life insurance is not necessary at this stage. It may be sensible to start some sort of short-term life insurance savings plan. However, this need not include life cover, but would allow you to accumulate capital over, say, five years. These savings could then be used as a deposit or as a security for a loan to secure a mortgage.
To sum it up, with no liabilities, a life insurance policy is not really needed. However, an income replacement plan would be a prudent move in case you become ill or cannot work, but of course still need money to live on. Also, an income replacement cover would be advisable to provide cover until retirement. GP
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Article Source :
http://www.articleseen.com/Article_Loans and Insurance Policies – Knowing Your Options_3800.aspx
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Author Resource :
Wilson Field specialise is business recovery and personal debt solutions such as IVAs, CVAs and Liquidation. If you have taken out payment protection insurance on any of your loans then Real Claims specialise in PPI Claims which could win your thousands back from the loan companies.
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Keywords :
credit cards, credit card debt, Wilson field citizens advice, free debt advice, Consumer Credit Act Claim Solicitors, Bad Deb,
Category :
Finance
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Finance
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