Videos | January 5, 2012

What is life insurance and why do I need it?

Life insurance is like a financial safety net for your family in the event you are no longer able to provide for them.

There is a wide range of policies and types of cover - and this ING Be Good at Money video tutorial explains the basics.

Life insurance offers peace of mind
At a basic level, life insurance is a financial product that provides a lump-sum cash payout (or regular payments) to the beneficiaries in the event the policy holder passes away unexpectedly. The sudden loss of a breadwinner can spell financial disaster for a family - particularly if there are mortgage payments to meet and other long-term commitments.
This video describes life insurance as "peace of mind" because "financial responsibility for your family will be passed from you to your insurance company should something happen to you".

How life insurance makes cents
Life insurance involves paying premiums in return for the cover. Because the number of people who end up claiming life insurance is less than the total number of policyholders, life insurance can be affordable for many people.
Make sure to include these premiums in your budget.
View life insurance as your second emergency fund.

'Pimping' your policy
It is important to learn about types of life insurance and the extras available to add on. Explore the important differences between term life insurance and whole of life policies.
The most basic type of life insurance only pays out in case of death. Optional extras might include coverage for disability, a diagnosis for a critical illness, hospitalisation, or insurance to cover the risk that you can't keep up with your premiums.
This video compares it to upgrading from a basic car to one with air conditioning, leather seats, or four doors instead of two. But remember: every extra will cost extra. So compare the fees and costs connected with your policy. Shop around, just as you would if you bought a car.

Lay out all the facts
Applying for life insurance involves providing information about personal circumstances and health. Used to by the insurer to determine the risk it is taking on - namely you - it is important to be truthful when providing the details.
Not only does it help the insurer make the most accurate assessment of the risk and the premium you need to pay, the insurer is also likely to not be obliged to pay out if it learns a policy holder knowingly gave incorrect information.

Life insurance

eZonomics team
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