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Demystifying Life Insurance

Imagine a mug that people pass up in the shop because they think it has an unusual design or lacks immediate appeal; Yet, maybe it is more than just a mug: it has an inbuilt blender, or a temperature regulator to keep your beverage hot or an anti-spill suction mechanism to ensure you don’t spill that treasured drink. How would one know, if you just passed it up without a second glance?

Life Insurance is no different. It is like that mug that we dismissed only to realize it was exactly the mug we needed., Sadly, even those who are aware of its benefits, still end up procrastinating thus delaying or missing out on the benefits altogether.

So, what is Life Insurance anyway?

Life insurance as the name suggests is a type of insurance where one (policyholder) pays a regular fixed amount (premium) to an insurance provider and receives an agreed sum of money either in the unfortunate event of their incapacitation, demise or after a set period of time (maturity). Once the policy matures, you as the insured person gets paid the pre-agreed target amount (sum assured) plus accrued bonuses, if any, in form of installments or a lump-sum. This is also paid directly to one’s nominated beneficiaries, should they unfortunately pass on before the policy matures. This makes it a great financial planning tool as it combines protection with investment.

The beauty about life insurance is that you get to cut your coat according to your cloth, which means that at the inception of the policy, you determine both the duration of the policy and amount you intend to save.

There are various types of insurance policies in the market. In this article we will feature endowments. An endowment is a type of life insurance where you make monthly or periodical payments and you get a guaranteed payout after a specified period of time, i.e. when the policy matures or in the unfortunate event of your demise. Some endowments even pay out in the unfortunate event of your incapacitation or if you are diagnosed with a critical illness. Typical maturity periods for endowments are ten, fifteen or twenty years, up to a certain age limit.

At ICEA LION we have the Anticipated Endowment Plan and the Endowment With Profits Plan:

The Anticipated Endowment Plan: An Anticipated Endowment is an insurance policy that gives you a platform to grow your savings by making regular payments (premiums) over a specified period of time. It is suitable for anyone who wants to save up for a long-term goal, but still wants to enjoy interim rewards to take care of short term goals. It gives you a set number of payouts over the duration of the policy. Endowments grow your savings because the potential bonuses you gain are derived from the interest accrued from the investments made on your behalf by the insurer.

The Endowment With Profits Plan: Like the Anticipated Endowment plan, this plan also allows you to grow your savings over a specified period of time with the benefit to pass this on to your nominated beneficiaries in the unfortunate event of your demise. This plan however does not have partial payments during the course of your policy term. They are accrued to be paid on maturity and that is why the Endowment With Profits plan gives you a better return than the Anticipated Endowment plan. It is suitable for your long-term goals as it gives you a disciplined means of saving.

In what situations should you really consider Life Insurance?

If you have dependants: A life insurance cover is a sure way to ensure that those who look up to you for their sustenance have a place to start in the unfortunate event of your demise or incapacitation.

If you have goals: Because the duration and the maturity value are predictable you can attach a goal that shares in this duration such as: travelling to a dream destination, funding your education or a down-payment on property among others

If you need a disciplined way of saving: A life insurance policy restricts access to your funds before maturity by imposing stiff penalties that discourage you from withdrawing from the policy pre-maturely.

Terms to note

Face Value: The face value or death benefit is the amount of money the insurer guarantees to the beneficiaries identified in the policy when the insured passes on.

Maturity Value: This is the amount the insurance company pays the insured when the policy matures. This amount is the sum assured plus bonuses,if any.

Surrender Value: This is the amount the insurance company pays out should the insured party request to terminate the life insurance policy before the contract term ends.

Automatic Premium loan: This is an insurance policy provision that allows the insurer to deduct the amount of an outstanding loan from the value of the policy when the loan premium is due. The cover in this case is used as security.

As you might know, life insurance is quite integral when it comes to securing your future and that of your loved ones. Got any questions?

Feel free to contact us on on 0719 071 999 or email contactcentre@icealion.com

How can we help?

Contact us and one of our agents will reach out to give you assistance.

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