Life insurance is an act of love. It is one of the most important decisions you’ll make in your life.
Life insurance is the simple answer to the following difficult question: How do you imagine your family’s financial future if you suddenly pass away? In reality, no one wants to think about issues like that. However, if you have financial dependents, it’s not an issue you can ignore.
Life insurance can be the main source of income for the family in extremely difficult times, allowing your loved ones to:
- cover current outgoings
- repay debts (such as loans, credit cards)
- pay inheritance tax
- keep a family business going
- cover the cost of your children’s education
Life insurance cannot bring back a parent taken from the family early, but can smooth what is a difficult path for those left behind. It is proof to your loved ones that “life goes on” and that you’ve made sure they can continue to live their lives in the way you dreamed and planned.
In a life insurance contract you specify the amount you want your beneficiaries to receive if you pass away and insure that sum. Cover takes effect in the event of death due to either illness or accident. When entering into the contract you specify who you want your beneficiaries to be and what amount you want each of them to receive if there is a compensable event.
If there are people who depend financially on you, then the answer is yes. Some characteristic cases of people who need life insurance are given below:
Couples with children
The most common case of those who need life insurance is families with children. One of the most beautiful chapters in people’s lives, starting a family, comes with dreams and plans about your children’s future. Every parent wants to provide the very best to their children, to see them grow up in a prosperous, love-filled environment. Life insurance is the ideal way to ensure the family’s financial prosperity if one of the parents (whether working or not) passes away early.
Having secured a nest egg for your spouse and children, you’re ensuring they can meet current financial obligations, settle any debts, pay inheritance tax and maintain their current standard of living. At the same time your children can cover the cost of their education and make their dreams a reality
Life insurance is a ‘promise’ to your loved ones that the dreams and plans you made together will materialize not matter what happens to you
Single parent families also need life insurance. When covering current and future financial needs all comes down to you, and you alone, life insurance will be your financial ally throughout your life.
Most small to medium-sized enterprises in Greece tend to be family-run businesses. The assets of those enterprises typically don’t report the owner’s value; and owners play diverse roles in such businesses. They work as employees but at the same time also manage the business and assume all responsibilities If the specific person suddenly passes away, their family must take up those duties themselves to avoid the unwanted situation of having to shut the business.
However, in most cases the affected owner’s spouse or children are not in a position to do that, meaning the business is forced to close. That has the added knock-on effect that the family loses the income generated by the business. Life insurance is a life-saver, providing the family with adequate capital so that they can hire one or two people to take over running the business.
In addition, life insurance also protects your heirs. It puts them in a position to pay any debts the business has to suppliers, employees, and the state without being personally burdened by them or finding themselves in the even more unpleasant position of having to borrow money.
Unmarried people without children
Most people in this category think they don’t need life insurance since they do not have financial dependants. But before definitively answering the question of whether you need life insurance or not, consider whether your income financially supports other members of your family (such as your parents or siblings) either because they earn a low income or because they face chronic health problems or have a disability. In addition, if you’re a borrower or credit cardholder you need to ensure that your family won’t be burdened with having to pay those debts if you pass away early.
Property owners – Paying inheritance tax
If you own property and want your heirs to be able to acquire your property free of financial burdens when you pass away, then life insurance is the ideal way to achieve that goal. In Greece over recent years we’ve seen a rising number of cases of spouses and children passing up their inheritances since the taxes they need to pay to accept their inheritances are unaffordable. Using life insurance you can set the amount your beneficiaries will collect to pay inheritance tax.
Working out the level of life insurance capital you need is one of the most important aspects of the insurance process. The level of capital depends on quite a few factors such as your age, marital status, financial obligations and sources of income. A good rule of thumb for working out the capital needed is to multiply your annual income by between 7 and 10. So, for example, if your annual income is € 40,000, your life insurance capital should be between € 280,000 and € 400,000. In all events, to work out the level of capital and plan your contract in detail, you need to work closely with your specialist insurance advisor.
The first basic distinction between types of life insurance depends on the duration of cover. More specifically, you can either have term life insurance or permanent life insurance. In the first case, the cover lasts a specific time period which you set when you sign the contract. It usually ranges from 10 to 30 years. In the case of permanent life insurance, cover for you as insured person last for your entire life.
One interesting aspect which can be found in both of these categories is that life insurance can also function as a form of savings, allowing you as the policyholder, if still alive, to collect a significant part of the premiums you have paid in by redeeming the contract.
One of the reasons why people put off the decision to take out life insurance is because they think it will be expensive, without actually knowing whether that is true or not. In reality, life insurance can be quite cheap and can be tailored to suit your ability to pay the premiums. Key factors affecting cost are the level of insured capital, the duration of insurance, your age and your state of health.
Let’s look at an example
If you are 40 years old and you want to secure capital of € 50,000 for your family over the next 20 years, the cost is just € 18 a month.