Growth & Jobs | Use life insurance for financial protection against illness

Hugh Reid, managing director, JN Life Insurance, says life insurance should be used as a part of financial planning to address risks such as illnesses and a form of income replacement in the event of death.

Reid explained that life insurance provides financial protection for many families in times of crises such as illness and death. He noted that families are sometimes left with huge bills after these two unfortunate events because there are not enough funds to cover the costs associated with both.

“Life insurance is the jewel of financial planning because it is a tool by which you can control and mitigate risks,” he explained “A critical illness plan, for example, gives a family financial coverage in the event of a major illness such as a heart attack, cancer or stroke. When it comes to life insurance, you do not buy it because you are going to die, but because those who you love are going to live. So, it is a way of protecting whether it be your spouse, dependents or parents – those persons who depend on you while you are alive and will be left exposed if you die,” he pointed out.

Reid says that life insurance is best suited for persons with young children. He said it can be used as a form of income replacement for the family in the event of death. In addition, he said it can be used to cover debts such as a mortgage.

“A mortgage is the largest debt most people will incur. It is a debt that you do not want to leave on your dependent if you die prematurely. You do not want your dependent to be evicted out of your premises because they are unable to pay the mortgage debt,” he said.

Reid suggested that life insurance can be used as a tool to leave a legacy behind. For example, it may be used as an education fund for the persons attending one’s alma mater.

He noted that outside of the guarantee to pay a stated sum to a family on the death of its income earner, cash value life insurance can serve as a means through which individuals save because many persons who might not otherwise save consistently will, nonetheless, regularly pay their life insurance premiums.

“These funds can constitute a type of quasi-compulsory savings. Also, products such as annuities, provide a convenient, if not unique, means by which individuals can make financial provisions for retirement. Additionally, private life insurance can supplement, if not substitute for, benefits provided by government,” he informed.

Reid added that financial products such as insurance and pension should not be viewed as preparing for death, but rather giving loved ones a chance at life.

“Having a pension is not just for those who are getting up in age. It is about securing a future for yourselves and loved ones. Similarly, insurance is a good way to assist you in terms of planning financially,” he said.

The managing director urged Jamaicans to also consider passive incomes, which are incomes that are being earned while the person is “asleep.” This includes income from rent and investments.

“According to Warren Buffet, if you don’t find a way to make money while you sleep, you will work until you die. So, it is important to identify those assets, stocks, real estate, business income, which can accumulate while you are asleep,” he stated.