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Can Insurance Policies Guarantee Your Future Financial Security?

When contemplating on your financial security including that of your family’s, the most common advice you will receive is about a variety of insurance coverages. The most basic of course is a health insurance policy, which most large companies provide to their employees. A car insurance on the other hand, is a mandatory requisite of car ownership and vehicle-driving.

While there are other insurance coverages that can help pay for unexpected financial burdens, their use in the future is contingent. Contingency is related to the happening of a fortuitous event or occurrence, which may not even happen at all.

Now here’s the thing, insurance coverages require payment of premiums that can reduce your current personal capital. So before you decide taking out a policy for any insurance coverage, make certain your financial resources are in order. You do not need to have coverage for all, but only on one that will let you feel more at ease, and to not let you lose sleep, worrying over “what ifs,”

Take a careful look at what each insurance policy offers and then take into consideration its relevance to your lifestyle, your location and your occupation. Have awareness that the premium paid determines the amount of financial fallback you will receive once the contingent event or condition is triggered. Simply put, the amount of coverage is proportionate to the amount of premium paid in keeping the insurance policy active and enforceable.

Also, know what opportunities will be available to you after years of paying monthly premiums. Can you cash out the policy if in case you decide you can no longer afford to pay the premiums?

How Does a Life Insurance Policy Work?

Digital InsuranceA life insurance policy is a coverage on your life to which the financial remuneration will be paid to the beneficiaries you designated in the insurance policy. Yet if your beneficiaries are already of age, have steady jobs and living comfortably on their own, getting a life insurance would be impractical.

The death benefits received from this policy is tax-free because the purpose is to ensure that the beneficiaries can continue to afford paying for basic needs in the event the policy holder dies. However, it’s important to note that the cause of death must be as a result of an illness or accident or a cause determined as not related to fraud or was not criminally motivated. Policies that include death by suicide are rare and requires payment of higher premiums and other legal requirements.

How Does a Long-Term Care Insurance Policy Work?

A Long-Term Care Insurance Policy is less fatalistic in its view of the coverage that will be provided to you. It actually works as a rider to a Life Insurance Policy, without requiring death as a condition to receiving insurance benefits.

The coverage entitles the policy holder to receive benefits that can be used in paying for assisted living costs. The latter refers to benefits that provide a policy holder with the means to pay for assisted living services in the event that he or she loses ability to carry out at least two daily activities on his or her own.

How Does a Disability Insurance Policy Work?

This policy will relieve you of financial worries in case a long term illness or accident prevents you from generating income to help you live comfortably/ However, this policy must be arranged while you are still in the best of health and physical condition. Moreover, the insurance company will also take into consideration your present occupation and the degree of disability risks you face in performing your job.

How Safe Are Insurance Policies During Financial Crisis?


The world is facing another financial crisis as a result of the coronavirus pandemic. People are worried that the lockdown will continue and will further affect the economy. The pandemic is raising concerns from all angles including the insurance industry.


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The financial crisis is also leaving its mark on life insurers. Yields are falling, but bankruptcies are unlikely. The financial world is upside down. In the US, banks are on their knees in rows, the insurance giant AIG can only survive with the help of the state, and the central banks pump billions into the market every day to prevent a collapse of the financial system. The financial crisis demands new victims almost every day. Concerns among insurance policyholders are rising. The question now is how safe are our life insurance policies?


Insurance industry will be impacted by coronavirus



What does the financial crisis have to do with my insurance?


Insurance companies have heaped up billions of dollars in investments with their customers’ money. The money is invested worldwide. However, there are strict regulations for the plant. The majority of the amount is invested in secure investments, such as fixed-income securities and covered bonds. A maximum of 35 percent of the investment amount may be invested in venture capital – for example in shares, company investments, or hedge funds.


What influence do the stock exchanges have on my life insurance?


At the beginning of the year, the Dax was still over 8000 points, on Friday it was around 2000 points less. This naturally reduces the value of the shares that the insurance companies have in their custody accounts. However, their share of the total capital investment is much lower today than it used to be. The equity quota in the industry is now only around ten percent, half the level of the stock market crash in 2002. In addition, the investment strategy of individual insurance companies is very different.


The financial crisis is also reducing bond yields, and this affects insurers much harder than write-downs on subprime stocks or falling stock prices. As more and more investors worldwide take refuge in safe investments, the price of the securities rises.


Will profit-sharing decrease?


In the boardrooms of insurers, it is traditionally not until the end of the year that the companies will credit their customers for the coming year. And if gloomy forecasts are right, the insured must expect falling earnings in the future. However, the profit-sharing in recent years remains unaffected.


What about unit-linked policies?


Unit-linked policies have significantly higher equity quota than conventional life insurance policies. Therefore, they are significantly more affected by the stock market crash. Nevertheless, customers should not now quit head over heels, but wait and see what comes. Anyone who now quits can expect considerable financial losses because the insurers first deduct their costs and the commissions paid by the agent.


However, recent developments should be a lesson for consumers. Many have been lured at the sales talk with the prospect of high returns that they have not questioned. This is taking revenge now. Experience has shown that the supposedly high opportunities are also associated with higher risks. Those who want a secure pension should stay away from unit-linked life insurance.


Can my insurance go bankrupt?


If an insurance company comes into serious financial distress, the state rescue fund – protector – intervenes, into which all insurers pay. Protektor takes over and continues the insurance contracts of the customers in the worst case. However, only the guaranteed interest rate of 2.25 percent is then paid.