Growth & Jobs | Use life insurance for financial planning and to cover risks, says Hugh Reid
LIFE INSURANCE should be used as a form of financial planning to address risks, says Hugh Reid, general manager, JN Life Insurance.
“Life insurance is the jewel of financial planning, because life insurance is a tool by which you can control and mitigate risks,” he informed.
He gave the advice while addressing a financial empowerment session organised by the JN Foundation in collaboration with JN member companies, JN Life Insurance Company Limited and JN Fund Managers. The session was delivered to employees of The Jamaica National Group recently.
“You do not buy life insurance because you are going to die, but because those who you love are going to live. So, life insurance is a way of protecting, whether it be your spouse, your dependents, your parents – those persons who depend on you while you are alive and will be left exposed if you die,” he pointed out.
He informed that life insurance is a key risk mitigant against premature death for persons with young children. He said it can be used as a form of income replacement for the family in the event of death. In addition, he said it can be used to cover debts such as a mortgage.
“A mortgage is the largest debt most people will incur. It is a debt that you do not want to leave on your dependent if you die prematurely. You do not want your dependent to be evicted out of the family home because they are unable to pay the mortgage debt,” he said.
Reid suggested that life insurance can also be used as a tool to leave a financial legacy. For example, it may be used as an education fund for needy students attending one’s alma mater.
Turning to other financial-planning measures that should be considered, Reid said it is important to put in place an emergency fund. He said an emergency fund will address any unforeseen expenses that have the potential to disrupt existing savings plans or create financial hardship.
He also added that savings is important and should be done automatically through salary deduction or standing order, as this helps persons from spending all of the salary they earn.
The general manager of JN Life Insurance Company Limited said persons should also consider developing passive incomes, which are incomes that are being earned while the person is “asleep”. This includes income from rent and investments.
“According to Warren Buffet, if you don’t find a way to make money while you sleep, you will work until you die. So, it is important to identify those assets, stocks, real estate, business income which can accumulate while you are ‘asleep’,” he informed.
The session was held recently under the theme ‘Securing the Financial Future You and Your Family Deserve. What You Can and Should do Now’. Other members of the panel were Rose Miller, manager, strategic empowerment, and Delories Jones, senior vice-president of sales strategy and marketing at JN Fund Managers Limited.