Pauline Muindi
In many African cultures, thinking about, or even planning on life after
death, is often considered a
taboo. As a result, many are wary about
purchasing life insurance.
In the past, in the event of the death of parents, there were many
relatives who would step in and take care of the orphaned children. Not
to mention that the offspring would still inherit ancestral land,
ensuring their social and financial security.
In the modern world, however, such resources have become scarce.
Extended families are no longer as close-knit; many people live in rented properties, and the cost of education is rising fast.
SEE ALSO :Planning for life after death is simply good sense
This
is where having life insurance comes in. In the event of your untimely
demise, having life insurance protects your loved ones from financial
strife.
Life insurance is an essential part of sound financial planning.
Many young people think that life insurance is something that only old
people should think about. But death comes to both the young and the
old. In fact, young parents are the people who need life insurance the
most.
Here’s why you should consider purchasing life insurance:
Taking care of loved ones
One of the biggest reasons for purchasing a life insurance is to ensure
that your loved ones are financially catered for after your death.
This way, your household will not be deprived of your income. If you
were the sole breadwinner in the household or you were a single parent,
they can be left in dire financial straits.
The money from life insurance comes in handy towards replacing the lost
income and help cover your children’s education and other expenses.
Life insurance pay out can also be used to cover the expenses incurred in the last rites such as a funeral or cremation.
Paying off debts
In Kenya, you are not legally required to pay the debts left by a
deceased loved one. As per Kenyan law, the debts are owed to the
deceased’s estate, not the heirs. This means that the debts are supposed
to be paid off through the deceased’s savings or the sale of any
property they have left behind.
Many people also assume that incase a husband or wife dies, their
surviving spouse is legally required to pay the deceased’s debts.
This
is not the case.
The Marriage Act states that marriage does not affect the right of
either spouse to own or dispose of any property other than the
matrimonial property. This means that you’re also not liable for a
spouse’s debts, unless the property was jointly owned.
In case the estate of the deceased is not enough to pay off all debts,
the heirs are not obligated to pay. But money from life insurance can be
used to pay off a deceased person’s debts.
Such debts include medical
bills, student loans, mortgage, unsecured loans, credit cards, car loans
and debts owed to friends or relatives.
If the deceased had secured a loan to purchase an asset (such as a
mortgage or auto loan), until the debt is paid, the asset belongs to the
lender.
If the person who took the loan dies and the heirs don’t make any
payment plans, the bank can simply sell the property and take the money
owed, plus interest accrued.
Therefore, having life insurance to cover any remaining payments from
such loans ensures that your heirs can inherit your property.
Bear in mind that some policies will also pay out if you become disabled
or critically ill, which ensures that you’re able to pay off your debts
so they don’t burden your loved ones.
To take care of your business
If you have a business partnership and your partner dies, it can leave
you in a complicated situation. Unless you have a written agreement
which says otherwise, your partner’s business shares are automatically
inherited by their heirs.
To avoid such complications, you might take a life insurance on your business partner.
This enables you to buy their share of the business from their heirs
without a hassle.
You can add a clause in your business agreement to
ensure that each partner is able to purchase the other’s shares in case
of death.
Some life insurance policies also come with other benefits, which can
help you strengthen your business. For example, you can buy an
investment-cum-protection life insurance plan which pays you a lump sum
amount when you outlive its term.
You can use the money to boost your business revenue.
Final word
In you take term insurance instead of whole life insurance, you will not get any payment once you outlive the coverage period.
Because of this, some people think that a term insurance isn’t a good investment.
You might also assume that you will live to an old age, and that paying
life insurance premiums for all those years will be unwise.
However, we can be sure of one thing – we will all die, although no one
knows when. It could be today, tomorrow, next year, or 50 years from
now.
Life insurance protects your dependants from the unknowable and makes an otherwise difficult time a little easier.
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