Do you see insurance as an expense rather than an asset? Here are three reasons why it’s actually an asset.
For the average person, determining whether insurance is an asset or a liability can be challenging. Here are three situations where insurance serves as an asset.
- When your insurance policy reaches maturity: An insurance policy becomes an asset once it matures, meaning you’ve completed the payments and received a lump sum.
What happens if you surrender your policy before its due date? If the surrender value is lower than the total premiums paid, the policy cannot be considered an asset. In other words, ending your policy early may lead to a net loss, as you might not recover the full amount you’ve paid. Additionally, surrendering the policy before maturity results in losing all benefits.
When you enroll in an insurance plan, including endowment policies, commit to keeping it until maturity to maximize its benefits and turn it into an asset.
- When risks turn into reality: Sometimes, an insurance policy becomes an asset even before it matures. This happens when a covered risk, such as a critical illness, disability, or death, occurs. When you face a risk included in your policy, your coverage activates, allowing you to file a claim and receive a payout.
You might worry that filing a claim could reduce your future earnings. The answer is yes, but the insurance payout will help cover your expenses when dealing with that risk.
- When your dependents receive benefits: Life insurance pays out after your death, providing your spouse, children, and loved ones with the funds needed to maintain their standard of living. It also helps repay debts, such as medical expenses, and covers future costs like your children’s education. Many families choose a mix of whole life and term insurance to meet both present and future financial needs.
Consult your wealth planner to evaluate your needs and choose the right type and amount of life insurance for you and your loved ones.
Now that you have determined that insurance is an asset, learn how to grow your wealth to better secure your future and ensure your dependents’ needs are met too.