Protecting your most valuable assets – your family
While we all hope that we will not have to face an unexpected tragedy, the reality is that people across the world are often affected by illness and untimely death. From worrying about how bills are going to be paid and how to keep the roof over your head, life would be a lot easier if you could guarantee financial security in such circumstances and although we cannot predict the future, we can plan for it.
The prospect of unanticipated financial difficulties means that you may need to change the way you think and handle your money sooner rather than later and planning now before tragedy strikes, will make those emergencies and events much easier to handle when you come face-to-face with them. Good financial planning is all about making sure that your family is protected should the worst happen to you and by setting a secure foundation in place to cover the essentials first, you can then start adding the building blocks to accumulate your wealth.
Whereas most of us insure our house and cars, protecting our biggest assets like our income and our ability to work which our family greatly depends on, is often overlooked. A family protection plan can help protect your loved ones from the financial uncertainty that comes with an unexpected death. Here we delve deeper into life insurance to explore how it can offer that much needed peace of mind.
How to prepare for the unexpected
As you map your financial future, there are a number of things to consider and several steps you can take to help you better prepare and protect your family from adverse circumstances.
- Build an emergency fund – whether it is for that leaky roof, a panel beating job following your recent car crash or a sudden job loss, an emergency fund is there to provide you with enough liquidity to pay for unforeseen expenses. Make sure that it can cover three to six months of your standard living expenses, whereas if you are a single-income family, your fund should cover you for a year.
- Draft a financial plan and stick to it – consider what you would like to achieve financially. Pass on wealth? Retire early? Once you have done this, start working out how best to achieve this. Try and stick to your financial plan as much as possible, however, do make changes when your circumstances change. Have a look at why having a solid financial plan in place is important.
- Invest wisely – there are several ways to approach investments with each strategy taking into consideration goals, risk tolerance and future needs for capitals, while serving as a guide to investors’ decisions. Regardless of whether you will opt for a conservative investment strategy or a more aggressive one, investments can generate a stream of income you can save up for that rainy day or when strategy strikes. For our full range of investment options have a look here.
While planning for every possible incident is close to impossible, having a contingency plan is certainly a step in the right direction and obtaining the necessary protection plan is a crucial element of your financial planning.
What is life insurance and how does it work?
A legally binding document whereby the insurance company promises to hand out a death benefit to the beneficiaries in exchange for premiums paid by the policyholder, insurance plays an important role when it comes to your financial strategy. When you purchase an insurance, you are expected to pay a premium either up front or regularly – typically every month – in exchange for this protection. Rates will vary to a great extent depending on the respective insurance provider, while things like your age and personal situation will affect the type and amount of coverage you can go for.
With policies available to protect you and your family, some that help you save and others that do both, insurance is particularly important if you have individuals who heavily rely on you such as your spouse and children. At the same time, it can also serve as a means for saving and retirement planning, as well as to pay one-time costs like funeral costs or outstanding debts.
What are the benefits of life insurance?
From offering financial security and peace of mind to protecting your financial independence and providing you with the possibility to build your savings through investments, there are several reasons why you should opt for a life protection plan. Here are some of the main benefits.
- A tax-efficient solution: a life insurance plan has a number of tax advantages while it may also offer tax-efficient capital growth, giving your beneficiaries the flexibility to use the funds as they see fit. For instance, some policies have features that can help transfer money to heirs with fewer tax liabilities.
- Build your savings: with some plans you can create and increase your wealth since these policies invest your premium in a variety of investment classes that deliver risk-adjusted and superior returns beating inflation and growing your money.
- Extra add-ons: your insurance can often be tied with other additional types of protection, such as a disability insurance which can replace a portion of your salary if you are unable to work.
- Flexibility: depending on your policy and provider, you might be able to adjust your premiums to suit your financial situation. On the other hand, having fixed premiums means that you know exactly what to expect in your budget.
- Buy young to save more: life insurance plans give you the ability to lock in low premium rates while you are still young, whereas as you grow older, you become more of a risk in the eyes of your insurer and as a result, you will be charged at a higher rate.
What type of life insurance coverage is available in Malta?
The very essence of life insurance products is to protect both your income and lifestyle, while their long-term nature means that they can help you make clear plans for your long-terms savings. Below is a general overview of some of the most common types of life insurance available locally.
Whole of life insurance
As the name implies, this is an insurance that is set to last for the whole of your life and it usually contains a savings component in addition to providing a death benefit. This insurance is paid out to a beneficiary when you pass away, provided that the premium payments were maintained. Premiums are generally more expensive when compared to other types of coverage, while depending on your provider and the policy, you may be at liberty to decide the amount of money guaranteed to be paid up before any bonuses are added, although this will depend on your earnings, your current wealth and your family’s lifestyle. Whole of life insurance can be set with or without profits, while you can also make arrangements for it to be unit-linked.
Fixed Term life insurance
In contrast, term life insurance lasts for a specific amount of years and guarantees the payment of the death benefit if the policyholder dies during the specified term. This type of insurance usually does not offer an investment return; however, it is the cheapest form of protection and can be the ideal option for those who have a limited income. Once the term expires you can either terminate the policy, renew it for another term or upgrade to a whole of life insurance. Premiums are based on the insurer’s age, health and general life expectancy.
Although more expensive than your typical protection insurance, an endowment insurance may offer further protection to your loved ones since it can help build your savings. With this type, premiums are paid for a number of years such as 10, 15 or 20 years, whilst this type of policy can be issued with-profits or on a unit-linked basis. With the former, the premium you pay is pooled with other premiums and invested by the insurance provider in a wide variety of assets such as stocks, shares or bonds. Any investment growth is paid to the insured on a regular and final bonus, serving as an excellent means of long-term saving with minimal risk and the potential for a good return.
On the other hand, with a unit-linked policy, premiums are invested in specific funds chosen by you, while the amount payable under the policy largely depends on the value of the investments in those funds at the time your policy matures. This means that the value of the sum to be paid on maturity is not known beforehand, while the value of your investments could rise but could also fall.
Depending on your provider, some life policies offer optional extras such as a waiver of premium whereby the insurance company will pay the premiums for you should you have to stop working due to illness or injury, however, you will still be able to maintain any benefits under the policy. This means that if you develop one of the serious health conditions listed in the policy, a lump sum will be paid out.
How to decide on the type of insurance coverage you need
A strong financial strategy that will protect you and your loved ones and help you remain financially independent will also largely depend on whether you select the appropriate insurance product. There are several factors that will condition this, namely your current life stage and lifestyle, factors such as your assets, your short-term and long-terms goals, as well as your financial responsibilities. You must also remember that life insurance is a long-term commitment that is not designed for you to cash in at an early stage. Here are some key questions you should ask yourself before deciding on the insurance coverage you need.
- Have you accumulated enough funds to cover various costs or debt should something unexpected happen to you?
- Do you have sufficient savings to see your family through in the event that you cannot work due to an accident or illness?
- What type of financial support does your family currently have and how may this change in the future?
- How much risk or financial loss can you take on your own?
- What kind of additional costs you may need to cover in the future that go over and above the typical household bills and living expenses? For instance, will you have to see your kids through their further education? Will you need to fork out money for your child’s wedding?
In addition, you must also determine how much income you would want to replace in order to maintain financial security. If despite answering the above questions, you are still unsure of which coverage to select, an insurance advisor is your ideal partner in making the right choice.
How CC can help you protect your loved ones
One of Malta’s largest independent financial services group and a founding member of the Malta Stock Exchange, CC pioneered the local financial services industry in 1972. Since then, the Group has constantly pushed forward and today it has established itself as a 360-degree financial planner for investments, pensions and life insurance. Offering a wide range of life insurance products, protecting clients’ family and providing financial security in the event of the unexpected is the cornerstone of our financial planning approach. Our experienced advisors can help you plan ahead for your future financial needs and make the most of your assets while offer protection and a return on your investment by providing a bespoke and transparent service at highly competitive prices.
Here are some of our life insurance products worth considering:
Whereas no insurance coverage can replace you, CC’s Protection Plan which guarantees that a payment is made directly to your loved ones once you have passed away can offer your family the financial protection they need. What’s more, it will enable them to carry on living in the family home they have grown to love, maintain their lifestyle and plans for the future and as an additional perk, they can also benefit from the free funeral expenses benefit which offers beneficiaries the option to receive part of the funds to cover this cost.
Free Life Insurance for New Parents
One of the most wonderful yet daunting experiences, having a baby can add meaning and purpose to your life in many ways, but at the same time, a growing family also means a growing list of expenses. Not being around to witness your child’s many milestones may seem highly unlikely, however, life can take an unexpected turn and should something happen to you, your spouse and children may face financial difficulties. The Free Life Insurance for New Parents can make things a little bit easier by helping your family pay associated bills and expenses such as inheritance taxes, while at the same time, establish your child’s financial security.
Whole of Life Plan
The Whole of Life Plan is a simple life insurance policy which pays a lump sum of money to your beneficiaries following your passing. Whether to cover funeral expenses, other expenses and duties, maintain your family’s lifestyle or to be used as a legacy for the next generation, this plan prevents your family from having to face additional financial hardship. The plan also offers the option to designate one or more beneficiaries to ensure that it pays out quickly and directly to the people you want the money to go to. At the same time, you also have the option to reinforce the protection plan further with additional benefits such as the accidental death benefit, the permanent total disability and the critical illness benefit.
For most people, purchasing a home is surely one of the biggest financial commitments to make and although it is considered a rewarding life event, it certainly is also a stressful one. Yet, have you ever wondered what would happen to your home if you are no longer here to provide for your family? An insurance policy that pays off the remainder of your loan in the event of your death before the loan ends is a great way of financially protecting your investment. The Loan Protection Plan is an affordable life protection that offers you total flexibility since you can choose the number of years you want the cover to last, while it ensures that your loved ones still have a roof over their heads.
Single Premium Plan
If you have amassed a lump sum of money along the years which you would like to invest but would like an alternative to traditional bank accounts and term deposits, then the Single Premium Plan is the ideal option if you are looking to obtain a level of protection but want a steady return. Providing you with long-term, tax-efficient capital growth, the amount you invest is guaranteed to be repaid on maturity or on the policyholder’s death, offering you the peace of mind that your investments are safe.
Whereas protecting yourself and your family is crucial, CC understands that businesses also want to ensure that their key human capital and business loans are protected. Your business activities have the potential to affect stakeholders, while the financial consequences of a potential mishap could easily erase any assets that have been accumulated. From our Key Person Insurance to our Partnership and Shareholder Protection and Business Loan Protection, our business insurance plans help companies of all sizes protect themselves financially.
Planning for a time when you are no longer here may be a daunting and intimidating undertaking, however, it is a necessary step to making sure your loved ones will be taken care of when you will no longer be here to do so. Visit one of our local branches situated in Mosta, Fgura, Sliema, Qormi and Birkirkara for a free financial health check and to explore our various protection plans. Get in touch with one of our advisors today.