Wednesday, March 28, 2007

Term Insurance and Finance

One thing connected to finance that everyone should get acquainted with is insurance, something that you should not try to get along without, especially if one has dependents who depend on the income you bring home. Insurance started with entrepreneurs organising long distance sea voyages from Europe to the Far East to trade. Such long voyages carry high risks, and a sunken ship may completely wipe out financially the entrepreneur. So they got together and put small amount of funds into a common pool so that if one is unfortunate to have met a misfortune, he gets reimbursed from the large common pool. Eventually such things got more organised, risk pooling spread to other areas like covering the risk of losing the income when a salary earner dies, etc. and insurance companies were born

Such pooling of risks are normally made by putting into the common fund which will cover a fixed period of time. If no untoward things happen, one doesn't get anything back in return. Such insurance policy are called term insurance. This makes term life insurance difficult to sell as many are reluctant to part with money with the prospect of getting nothing back in return. Elements of saving were then introduced and endowment life insurance policy was born. But rates for endowment policies are higher because part of the premium paid have to go towards saving to pay the policy holder at the end of the term. Also, insurance agents are rewarded via a commission basis, and they get higher commissions for helping to sell an endowment policy. The tendency is thus that they tend to recommend endowment policy irrespective of your actual needs.

In my opinion, endowment policies are a gimmick, and not worth buying as what seem to be a large amount insured may appeared big in the beginning, but with inflation over time, that amount becomes miniscule. I believe that if a breadwinner have dependents who depend on him to bring in income to survive, he should buy a term insurance policy which is just like a car insurance policy, and need only pay less in premium. If nothing happens to him over the insured period, he gets nothing back, but he can control the way he saves his surplus funds to take into account inflation.

AmericanDirect is an insurance company that specialise in term life insurance, and if my explanation of term life insurance is not clear to you, or you are not convinced, AmericanDirect have advisors are not rewarded on the basis of selling one policy over another. Their task is to make sure you get what fits your specific situation.

If my short discussion of life insurance is not sufficient AmericanDirect have a QuickCollege where you can get some quick education about life insurance.

You can get a quick online quote about the insurance you need from Quick Quote for up to $300,000 of affordable term life insurance that normally requires NO routine medical examination but only require you to answer a few health questions! You need to be truthful though, as giving false response may result in an invalid policy. Also, in some rare cases, they may require you to get a medical examination.

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