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  Category: Articles » Finance » Insurance » Article

Financial planning and insurance

By Mark Lambie

There are many things that are a key part of your financial plan. Budgeting
is important. So is investing. Estate and tax planning are vital. One area
you need to include is insurance. Insurance answers the question, "what if
the unthinkable happens?" Unfortunately, too many people avoid the topic
of insurance because they fail to see the benefit.

The benefit is this: they will have peace of mind that their loved ones will
be taken care of if they die. So why are you reading about insurance on a
site that has to do with loans? Simple. You may want to consider
insurance to cover your loans so that 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 add tragedy to
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? 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
likely always want to have that as an available gift to make.

However, for many other expenses, including your loans, a temporary
solution is better. For example the mortgage on your house or the loan on
your car are both 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. And 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.

For example, say you have a secured home improvement loan to last for
three years while you build an addition onto your home. At the same time
you 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's an excellent
way to ensure that your loved ones are not going to be saddled with debt if
tragedy should strike.

About the Author
Mark Lambie is the founder of Loan Source, a website for UK residents seeking secured loans. Visit our website today for a free Secured Loans quote and find out how much we can save you.

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