Thoughtfully purchasing a Life Insurance Cover gives you the ability to build wealth during your lifetime. To dive in deeper, there are two types of Life Insurance Cover namely;
- Term life insurance lasts for a predetermined number of years, then expires.
Permanent life insurance can last for a lifetime, no matter how long you live, as long as premiums are paid and the policy retains its value.
Here is how to leverage life insurance to build wealth
Fixed cash value life insurance can help you build wealth when you use it as a separate asset class in a diversified financial portfolio. Let’s dive in ….
1. Choose the right type of Life Insurance
There are different types of life insurance policies in the market that cater to people's diverse needs. For wealth building purposes, Endowment Policies and Money-back Policies can be an apt investment.
These policies, apart from offering protection against life risks, provide valuable returns. More importantly, you get flexible premium payment options; you can pay the premium monthly, quarterly, half-yearly, or annually. While these policies may not offer you high returns, it assures protection and good returns with minimal risk.
2. Start Saving
Investments have a significant role in wealth growth. However, you must increase your funds before you begin investing. As a general rule, you should set aside 10% or more of your salary in a different account. The account needs to be kept apart from both your emergency fund and regular savings account. When you have amassed sufficient savings, invest it all before starting over.
3. Make Emergency Plans
You might spend a few weeks in the hospital because of something as little as a vehicle accident. You'll rack up medical and auto repair debt, and you may find yourself frantically trying to get your finances in order.
You should constantly prepare yourself for the worst-case scenario in life. You should set aside a percentage of your monthly salary as an emergency fund that you can use as necessary. You should also buy and health insurance as a financial safety net. The rising cost of healthcare can be managed with a sound health strategy. Your life insurance coverage will offer your family some financial security when they most need it. Don't forget to purchase life insurance that is a minimum often to fifteen times your annual earnings.
4. Think long-term
Life insurance policies are essentially long-term financial products, making them a perfect wealth-building vehicle for the future. You can invest in long-term plans for the dual benefit of life protection and returns on investment. A part of the premium you pay is invested in money market instruments and you get market-linked returns.
5. Take advantage of the tax exemption benefits
Taxes constitute a significant part ofyour expenses; it takes away your income that you can utilize for otherpurposes. Investing in a Life Insurance policy allows you to get tax benefit on the premium paid under. The proceeds you may receive from the policy are eligible for exemption.
6. Prepare for your Retirement
You must have a specific retirement plan that is unrelated to your other investments and savings. Ideally, spread out your investments among several retirement plans.
Feel free to see a list of licensed Life Insurance providers here - https://uia.co.ug/insurance-members/life-companies/ for a Life Insurance cover.
Source: UIA Newsletter
