Micro Insurance Focus

There is no denying the importance of life insurance. As an integral part of your financial plan, life insurance can protect you and your dependents in the case of loss of income due to death. For a young couple, insurance is especially important as they have years of expenses ahead of them. From mortgage payments to their children’s education, life insurance is the ideal vehicle to protect assets and offset expenses. But, as obligations dwindle over time, older retired couples might wonder if life insurance is really all that necessary. After all, their children have left the home, their debts and mortgages have been paid off and the monthly insurance premiums may just be considered an unnecessary expense. Under these circumstances, one might consider terminating one’s life insurance policy. Another reason for wanting to terminate your life insurance policy may be that you just can’t afford the premiums anymore. Due to illness, loss of employment or other commitments, the monthly premiums are getting more and more difficult to meet. Is termination your best option then?

However, any financial expert would advise you against terminating your policy prematurely. Life insurance is a long-term commitment and should not be treated as a mere investment tool or a quick-fix device. If you terminate your policy ahead of schedule, you will end up paying additional charges and fees. If you have a term life insurance policy and you cancel it, you will receive nothing in return as there is no cash value component attached to such policies. With a permanent life insurance policy, you would have built up a cash value along with your premium payments. When you terminate such a policy, you need to pay a surrender fee in order to access the cash component. Often the surrender value will be less than the total amount of premiums paid over the years. If you have already taken out a loan against the policy and have not repaid the amount at the time of cancellation, you might not get anything in return. Additionally, there may be taxes incurred as well. Apart from all the warnings against the charges and fees that you will incur, ultimately terminating a life insurance policy leaves you and your family vulnerable once again. In such troubled economic times, the peace of mind attached to knowing that you are protecting your family from financial difficulty is priceless.

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A life insurance policy is evidence of a contract between two parties 1 party is the life insurance firm and the other party is the policy owner. Under a term insurance policy, the insurance firm promises to pay the sum insured, if the life insured dies inside the period specified in the policy if the life insured is alive at the end of the period, the policy terminates on that date  and the life insurance protection ceases.

1. Increasing term
Increasing term insurance may be employed in situations where the liability becoming protected against is both temporary and growing for example, such a policy might be used to protect the value of a key employee in an organization, where the employee’s salary is expected to boost every year. With this kind of policy, the annual premium typically increases in step with the increases in the face amount of insurance coverage.

2. Decreasing term
A decreasing term policy or rider offers for the payment of a fixed monthly benefit from the date of the life-insured’s death to a fixed future date, such as the 20th anniversary of the date of issue. Such a decreasing require could also be to guarantee additional monthly income until the youngest child is by way of school.Typically, premiums for term insurance policies are for the same quantity for each and every and every year of the term this is also the case for decreasing term policies.

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