The thought “what will happen if …”, makes many consider obtaining life insurance. In some cases, such as signing a mortgage or a loan, this insurance is mandatory, but beware! Sometimes such life insurance will only cover the value lent, that is, the mortgage or the bank loan.
That is why ensuring your family does not suffer in the face of unpleasant situations, such as the death or the disability of the head of the family, does not seem like such an outlandish idea.
Perhaps the most appropriate approach is the following:
“What risks do I want to cover?”
As head of the family, think about the following: what would happen if I am not here? Could my family live without my financial support? And if after an accident I become a 100% dependent person, would they go ahead with the mortgage payments and at the same time cover basic and other expenses within 5 years? 10 years?
If you are unsure of any of these questions, or the answer is directly a NO, your family will probably need additional financial support in such difficult times, in the form of insurance and protection.
But do you really know how to ensure they are absolutely protected?
You cannot have everything under control, but you can start by being farsighted.
What is life insurance?
It is a form of personal insurance that covers the risk in the event of death or disability before the expiration date of the contract. It is provided by a single or periodic premium received from the policyholder, and therefore has a single objective: to guarantee the economic security of the people who depend economically on the insured, reducing the economic impact of their loss.
One more expense or an essential lifeline for the family?
Having life insurance is essential for households which depend exclusively on the income of one parent, for example, or if they have children of school age, a mortgage, or other loans. In addition, obtaining life insurance only involves some simple procedures such as completing a health questionnaire or, where appropriate, going through a medical examination that personalises the risks. Then, the policy and the premium conditions are established for each case: accident, illness, disability or death.
Once the decision has been made and the insurance obtained, is the financial stability of my family fully guaranteed if any unforeseen event occurs?
To think that simply by obtaining life insurance you will avoid economic headaches for your loved ones is not entirely true. If your children are minors, it is best not to name them as direct beneficiaries, so they cannot be given the insured amount if it is not through executors, or other legal procedure.
You should consider linking life insurance to a trust. If the idea is to protect your family to the maximum, this option will undoubtedly help.
A trust is a contract through which one or several people transmit their assets as a last will or as a living donation. This transfer may be material goods or present and / or future rights. It is always done through a second person, in charge of managing them, to deliver them to the people chosen as beneficiaries, such as children, grandchildren or nephews.
The best thing about this system is its transparency and security, since the management of the inheritance will always be carried out following the instructions set by the trustor. For example, the payment of the sum insured, through this system will help protect your children from their own excesses, or even from the mismanagement of third parties that could put their economic stability at risk.
The assets transferred in an irrevocable trust are shielded against creditors or liens, since the issuer loses his property and transfers it to third parties. These assets, being disconnected from the original owner, enjoy some immunity and are always protected by their wills.
In addition, this type of arrangement is very convenient since it minimises inheritance taxes and relieves the beneficiary of the payment of tax.
If you want to make sure your family is fully protected, then life insurance is a necessity and seeking professional advice to set it up in the most appropriate and beneficial manner is a must.