In one sense, life insurance is just another financial product to be sold. Cold callers disturb us at home. There are ads everywhere. But, somehow, we are more patient. Although insurance is always about the money, this time, it is about using money to provide for the people we care about. All this marketing effort prompts us to think more carefully about our values and what we would like to pass on to the generations to come. That said, life insurance is also a potentially useful way of building savings and providing a resource to draw on during retirement if our other pension arrangements are stretched a little too far by an emergency. So you have the task of balancing two different concerns:

• will your spouse or children be in financial difficulty if your earning power were to disappear? This is you looking into the future and making practical arrangements to give them some security and peace of mind on money matters; and
• will your savings be enough to pay for big bills as they arise over the years to come, e.g. your children’s college education; can you cope with emergencies during retirement? If not, you should put something in place to give you peace of mind.

Life insurance is one of the building blocks in planning for the future. Truth be told, we should all take professional advice on tax planning for the next ten years, investments and retirement provision, and estate planning. To put together the best plan for ourselves and our family, we need to get the best understanding of which strategies and products are the most tax efficient and will allow us to build up our asset and investment portfolio. This plan will strike the right balance between our immediate personal interests and the natural desire to make longer term provision for the family and those who depend on us.

It is really a simple contract between you and the insurance company. You pay a set sum of money on a regular basis. This is called a premium and there are instalment plans for monthly, quarterly, six and twelve monthly payments. This money is invested by the insurer. When you die, the people you have nominated as beneficiaries receive a sum of money. This can be an amount you fixed when you bought the policy, or it can be the result of the investments made by the insurer (less a management commission). Under normal circumstances, this money is paid free of any income tax. This is important because, with the right decisions, the premium instalments you make will also be tax deductible. That is one of the features making insurance so important. The money going into and paid out of the policy fund does not attract income tax. So take the time to shop around and get the maximum number of life insurance quotes so you can weigh up what the market is offering and how much you will have to pay as a premium. Then, with a little advice, you can put the right policy in place to ensure your family’s financial security.