Life insurance is a good tool for people to build generational wealth.

This is the case that Othneil Blagrove, senior manager of sales at JN Life Insurance Company, made recently. He explained that life insurance provides coverage against major illnesses and can be used to protect the family’s income in the event of the death of a breadwinner.

He added that different insurance policies effectively offer protection in the event of an untimely death or a major illness. What differentiates insurance policies are their costs, purpose for which they are needed, or the requirements to access the policy.

Different policies

“You have different types of insurance that are designed by life insurance companies to provide pure insurance protection for the temporary need of the client or where larger coverage amounts are needed and affordability is an issue,” the insurance sales manager explained.

“There are insurance products such as whole life, universal, term life, critical illness plans and others, which are effective in providing protection against eventualities. Term insurance, for example, [is] designed by life insurance companies to provide pure insurance protection for the temporary need of the client, or where larger coverage amounts are needed and affordability is an issue. It also has cheaper monthly payments and is the lowest cost for life insurance,” Blagrove shared.

Term insurance, he further asserted, is also perfect for young people and the premium remains the same throughout the tenure of the policy. 

“The drawback is that the policy eventually expires. Therefore, the duration should be long enough to cover your needs. Also, with exception of the JN Life Vest, term life insurance policies don’t have an investment option,” he stated. 

On the other hand, whole-life policies are permanent insurance that may also provide a cash value accumulation with guaranteed rates. Policyholders pay the same premium throughout the life of the policy.

Meanwhile, universal life offers long-term protection and also provides a cash value accumulation with variable rates.

Blagrove emphasised that life insurance is beneficial because of the coverage the policies provide to the insured. These policies can be a launching pad for building generational wealth.

“Insurance plans such as a term plan may be used as protection in case of the death of the family’s income earner. The wealth passed on to the next generation would be protected because the death proceeds from the term plan would be used to cover the final expenses of the insured and, thus, his or her assets would be able to be passed on to their beneficiaries,” he stated.

“In the case of a critical illness plan[s], they provide protection in the event of a major illness, especially to the breadwinner, which can sometimes place [an] additional burden on the family to find those extra funds to care for their loved ones. Life insurance, on a whole, is good to have because it prevents families from being burdened with huge expenses in the event of unfortunate circumstances,” the JN Life Insurance manager continued.

Not all life insurance is the same

However, not all insurance policies are designed to assist with major illnesses, as some were crafted to provide assistance to families in the event of untimely death or unfortunate circumstances. Blagrove pointed out that insurance policies, such as term plans, whole life and universal plans were examples of policies designed for those situations.

“These policies, for example, a term plan, may not assist with illnesses since it only offers life insurance coverage and not critical illness insurance. Only JN Life has a term insurance plan with investment attached as an option. Since the term plan expires after a period, the investment built up over the period will assist the client to care for any need that he or she may have at that time,” he said.

“All the policies have benefits and disadvantages. As such, it is best you speak to your financial advisors to find out which policy is ideal for you. Also, you may have more than one product because you want to be able to reduce the risk of additional financial setbacks in the event of an untimely death or major injury,” he added.

Mr Blagrove emphasizes, too, that life insurance is not just for the wealthy and should be considered no matter one’s income.

“It is actually more affordable than many people believe. I recommend that you have a conversation with a financial advisor to determine the right policy that can fit within your budget,” he advised.