Financial Planning and Insurance
There are many vital parts of a financial plan: estate planning, mortgages, credit cards, and UK Secured Loans. One area you need to include is insurance. Insurance answers the question, "what if something bad happens?” No one likes to think about it and too many people avoid the topic of insurance because they fail to see the benefits.
With insurance, you get the peace of mind that their loved ones will be taken care of if they die. What does insurance have to do on a site about loans? Quite simply, you want to consider insurance to cover any loans so if you were to pass away, your loved ones will not be saddled with unexpected debt.
And, if you have a secured loan that your loved ones cannot cover, you do not want your assets seized to cover the loan. That will just add additional grief and tragedy for your loved ones!
So how do you know what kind of insurance to get to cover your loans? Or any expenses at all, for that matter?
Making Your Decision
The easiest thing to do is to determine the length of time that a particular expense will be present in your life and get insurance that matches the term of the expense.
For example, any death or estate tax will always be present in your life because no matter when you pass away, those expenses will be incurred. Also, if you want to bequeath a gift to a charitable organization, you will always want to have that as an available gift to make.
However, for many other expenses, including your loans, a temporary solution is better. Some examples are the mortgage on your house or the loan on your car. Both are excellent loans to create insurance for. This way, if you were to pass away while these expenses are still present, they will be automatically paid off at your death. Additionally, because you are matching the term of the loan to the term of the insurance, you are only buying insurance for as long as you have the loan.
As an example, if you have a secured home improvement loan to last for three years while you build an addition onto your home you should also take out a three-year term insurance policy for the same amount as the loan.
If you were to pass away in the second year, the insurance would pay your loved ones the full amount of the loan, of which they can use two thirds of it to pay the remaining portion that is still outstanding on your loan.
People do this for many kinds of loans, including their mortgage, their automobile loans, and any other kind of loan they have. It is an excellent way to ensure that your loved ones are not going to be saddled with debt if tragedy should strike.