5 years ago, one Saturday morning, I climbed a 27 feet ladder to clean the gutters on the roof of our house after the fall, because the falling leaves from trees around the house had clogged the gutters hindering easy flow of rain water down the sprout. As I was making my way slowly up the ladder, my then 10-year-old daughter, whom I thought was still asleep and whose room is on the first floor of our one-story building house, opened the window to her room, looked at me for one second and asked, “dad, do you have life insurance?”. I said yes while taking the next step up the ladder, then she closed the window and went back to sleep. She will be 15 in the next 7 days.
Up till today, I am not sure how a 10-year-old knew about life insurance, but that question gets me thinking each time I remember that encounter.
Life insurance and estate planning is one of those things people, especially Nigerians, do not want to talk about because they touch on the inevitable, death. No matter how scary the thought of death could be, it is good to factor it into your overall financial planning.
In his “7 Habits of Highly Effective People”, Stephen Covey says that highly effective people live with the end in view. Many people spend time planning about retirement, which is good, but retirement takes care of the future, but we should also plan for the ultimate end because for some retirement may not come but death will sure present itself whenever and wherever. What an unpleasant truth!
Life insurance has even become more important now in Nigeria than ever before given the number of news about people dropping dead or slumping and dying without any prior signs of illness not to talk about the increased incidence of road accidents and poor health care delivery and facilities.
This article is not meant to scare you but to arouse and sensitize you to the need to do the needful.
Why You Need and Should Get Life Insurance
- Peace of Mind: Like I noted in the introductory part of this piece, by daughter went back to sleep after finding out that I have life insurance and she was not much bothered about me climbing to the top of the roof, that is peace of mind. Having a life insurance reduces anxieties on you and your dependents and such anxiety reduction in turn improves your mental and physical health.
- Payment for Losses: The existence of life insurance often supplies the financial resources that permits a family to continue despite serious losses that have occurred. The death of a breadwinner can bring financial disaster to a family. When a breadwinner dies, family income dies with him/her with the implication that the spouse and/or children may have to give up their home or even schooling and accept undesirable alternatives. But such perils can be met with the proceeds of a life insurance in such a way that the family remains intact after the loss.
- Stimulates Savings: Ownership of a life insurance policy instills or encourages thrift because the premium that you pay each month, although small compared to the possible loss it protects against, is in essence, a prepayment of a potential loss. By making the monthly premium payments, you are saving for the unfortunate event of death. Some life insurance policies have additional savings built into them thereby encouraging even more savings.
- Business Continuity: For those in business of their own or have their own companies, life insurance serves a wide variety of purposes especially in the area of business continuity.
- Funeral Expense payment: Funerals are becoming increasingly expensive in Nigeria and some families have had to go into various types of debt or even sell landed or other properties to offset the cost of funerals. Of what use is it to subject your family to some debt repayment long after you are gone? If you cannot afford funeral insurance, getting a life insurance can provide a veritable source of fund with which to defray expenses arising from funeral activities.
Who Needs Life Insurance
Life insurance may not be for everyone. An individual’s economic human life value is derived from earnings capacity and the financial dependence of other lives on that earnings capacity. This means that a human life has an economic value only if some other person or persons can expect to derive pecuniary advantage through the existence of that human life. Therefore, if an individual is without dependents and/or other persons or organizations that stand to benefit from his or her living, either now or in the future, then that life has no monetary value that needs to be perpetuated through a life insurance policy. Any one that falls into that category does not need life insurance.
You can Start or make it Small.
You do not have to have a humongous amount of life insurance, it is the total absence of life insurance that matters, not really the value. You do not have to have a whole life insurance as that is much more expensive. You can get a term life insurance which covers your family until such a time that they are no longer dependent on you. If you cannot afford the higher premium that goes with a large value life insurance, opt for what you can afford, although most financial planning experts say that it is better to get large value life insurance when your dependents are young and as they become less dependent on you, you downsize.
When it comes to financial planning, the earlier the better because time, they say, is money. The earlier you start to save, the more you accumulate at the end and with life insurance, the earlier you start, the less your monthly premium because it is believed that younger individuals have less health challenges and lower mortality rate. If you do not yet have life insurance and you have dependents, get one now.