Many people see life insurance as an investment, but when compared to other investment vehicles, referring to insurance as an investment simply does not make sense. Certain types of life insurance are touted as vehicles for saving or investing money for retirement, commonly called cash-value policies or income building policies.
These are insurance policies in which you build up a pool of capital that gains interest. This interest accrues because the insurance company is investing that money for their benefit, much like banks, and are paying you a percentage for the use of your money.
However, if you were to take the money from the forced savings program and invest it in an item in the financial markets, you would likely see much better returns.
Having a solid and working savings plan is one of the most fulfilling financial decisions, and more so when combined with insurance. If used well, insurance policies can function as savings plans too and offer both protection and a disciplined way to save regularly.
In order to make the most out of your policy, you need to consider the following ways to save and spend better with insurance:
i) Consider obtaining an endowment insurance policy
An endowment policy is essentially a life insurance policy which, apart from covering the life of the insured, helps the policyholder to save regularly over a specific period of time so that they are able to get a lump sum amount on the policy maturity in case they survive the policy term.
This maturity amount can then be used to meet various financial needs such as funding one’s retirement, children’s education or buying a house.
Endowment policies are basically of two types; with profit and without profit. Within these two classes, there are many variations of endowment plans structured to meet the needs of child education, whole life protection, and pension, among others.
Endowment plans provide a disciplined route for savings, which could come in handy in case of a financial emergency. An added advantage is the life risk cover which would be of great help to the family if something unforeseen happens to the breadwinner.
ii) Bundle your insurance policies
Paying premiums to three different insurance companies, opening many emails about insurance and having to pay varying (and at times expensive) premiums to the separate companies can be quite tedious. Bundling insurance policies, however, can help ease the process and save up a lot on your insurance.
Bundling involves obtaining more than one insurance cover from a single insurance company. Insurance companies sometimes offer “multiline discounts” to attract customers who will need more than one type of insurance. These companies offer a cheaper rate to insure both your house and car than if you insured each one separately at different companies. They also offer the same if you add a second car or a life insurance policy. Depending on the value of your assets (home and car), these discounts combined could save up on a lot of money.
These companies offer a cheaper rate to insure both your house and car than if you insured each one separately at different companies. They also offer the same if you add a second car or a life insurance policy. Depending on the value of your assets (home and car), these discounts combined could save up on a lot of money.
iii) Claim higher deductibles
Deductibles refer to the amount of out-of-pocket money that one has to pay before the insurance company begins to insure. Insurance experts suggest that by claiming higher deductibles, one can reduce the premium that is paid later.
The voluntary deductible is the amount you pay at the time of the claim, and if you pay a higher a voluntary deductible, then it converts into a sort of premiums-discounts over time. If you increase your deductible, your premiums will decrease, which ultimately means your monthly bills will be lower.
Essentially, these pointers will help you to keep a few extra shillings in your pocket, save for a later expense and ensure you get a better deal on that policy.