The Primary purpose of Life Assurance is to lessen the hardship which may result from AN UNTIMELY DEATH and RETIREMENT.
Now we are saying that life assurance is very important because death can come at anytime. If a man has life assurance policy and he dies , his beneficiaries will be compensated. Its called DEATH BENEFIT.
HOW DOES IT WORK?
Eg...... if a person picks a life assurance policy and he has a projection to save 20million Naira for 10 years. Now maybe after 2 years, he has only saved 700 thousand Nair only and the policy is still ACTIVE, then he dies.
Life Assurance company will pay the beneficiary/ies 20 million naira, The 20 million he hasnt contributed.
Why?
Because there is life cover on his policy. But if the he survived till 10 years he will collect his maturity benefit.
Life assurance is also very useful for retirement purposes. A man that is working now should also be planning towards retirement.
Life Assurance is designed to protect against the hazard of dying too soon or living too long.
Other benefits of Life Assurance.
1. Savings & Investment
2. Additional collateral for loan in the bank/policy balance
3. Tax Rebate/Relief
4. Guarantees future education of a child
5. Retirement purposes
6. Income protection for the family in case of eventualities.
Etc........
Life Assurance policies are similar to having a savings plan in other financial institutions but with additional benefits as an insurance company.
Benefits of Life Assurance Policies
1. Life cover / death benefit. If a man has a life assurance policy and the unexpected happens to him, his beneficiary/ies get compensate. Eg a man that has a savings plan of 5 years looking at contributing 5,000,000 and he is saving it monthly or quarterly or half yearly or annually, if he has contributed little and dies eg maybe he has only done 600,000. his beneficiary/ies will receive that 5,000,000 he was targeting because there is life cover. That is what makes us insurance company and different form other financial institutions like banks etc..
If he survives till maturity, he will still receive his 5,000,000 with interest.
2. Tax Rebate/ relief. When a man has a life assurance policy, it reduces the rate of tax they pay.
Eg if you and 1 work in the same place, and we both have total annual incmone of 10m each and we both pay tax of 2m each. That means our take home annually is 8m each.
Now if you have a life assurance policy and let us say you are paying 1m annually, you will receive a tax rebate certificate to submit where you work based on law. So that 1m you pay for your life assurance policy will be deducted from your annual tax charges. That means 2m - 1m = 1m . So you will only be paying 1m for tax while the other 1m goes for your life assurance policy premium. While me who does not have a life assurance policy is just wasting 1m annually by paying 2m as tax.
3. Collateral for loan:- when you have a life assurance policy, you can use your policy document that will be issued to you as a client to get loan from any financial institution eg banks.
4. Loan policy benefit:- it means you can also get a loan from your account balance from your policy.
5. Fatal Accident/permanent disability benefits:- when you have a life assurance policy, it gives you those covers too.
6. Bonuses/interest:- all policies have different interest rates to your savings based on type of policy purchased.
For the products
There are different kinds of policies based on what indicated wants and duration.
Eg 1 year plan, 2 years and above.
Some product matures just once while some has 3 maturity stages. So it depends on individual needs/ want.
Education Endowment plan
Ordinary Endowment plan
Personal investment
Short term Savings plan
Long term savings plan
Retirement plan
Triple payment plan
Etc
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