The Importance Of Life Insurance Whilst Under Debt
We all know how difficult it can be to cope with the death of a dearly loved one. It is also a lot worst if you have to sit with the financial burden of the deceased’s debt. We have seen to many sad cases of where the family members of the deceased should struggle with the debt that has been left for them. In this article I will explain why it is so important to have a good life insurance policy, regardless of the tough economic times of today.
It might be hard to believe, but it is even more important to invest in such a policy if your finances are a bit tight. We would all think to eliminate all extra expenditures, but I will explain why it is so important.
Life cover can help with many different problems that might occur after the death of a loved one. A life insurance policy will pay out a specific lump sum of money which you can then use to replace the deceased salary, pay of a mortgage, pay for educational costs or even to hep with a business.
In South Africa we can see that debt is becoming a big problem for people off all different incomes and backgrounds. We will find that most of the debt counselling companies will advise you to get a life insurance policy in place before starting with debt counselling. Just to provide security for your family and loved ones. This will also help to provide security to your current debt and creditors.
We find that it is very difficult to convince a client to invest in a life insurance policy if they are under severe debt. In South Africa the average age of people who apply for debt consolidation is 37, and has an average income of R16 000 and has an average debt of R550 000, where almost 40% of that is high interest rate debt like credit cards and clothing store accounts etc. The other 60% is usually mortgages and motor finance. Most of these people cannot provide any form of financial security to their loved ones by not having any type of life insurance policy in place. I will never advice someone to cancel their life insurance because they want to use the funds rather for debt settling.
If you don’t have any type of cover in place, then you should consult with your debt counsellor to review your budget to see where they can help to get some sort of security in place, just for the sake of your family. In severe cases there are people who just can’t afford a policy like this at all, then I will advice them to concentrate on their debts for a while, and use their annual income increase for a life insurance policy.
I cannot emphasize enough on how important it is to have life cover, especially in the time of heavy debt.
To conclude. We now understand the importance of life insurance, especially if you are under debt. It is a very responsible investment to make. Ask you’re self if your family will be able to carry the financial burden if you have to pass away with huge amounts of debt.