Death benefit insurance: to take out or not to take out?
More and more people are choosing to take out what is known as term life insurance, so that their relatives or family will have the financial support they need after their death.
Although the benefits of this insurance are diverse, many still wonder if it is a good idea to take one out. Below you will get more advice related to term life insurance, in which situations it is best to take it out and what happens if you don't.
When is it wise to do purchase term life insurance?
There are several situations in which purchasing term life insurance is a good idea. Below is an overview:
1. Paying the mortgage after your death
With term life insurance, you can be sure that after your death, your family or relatives will have all the financial resources they need to continue paying the home mortgage. In many cases, the loss of an income means money problems for dependents, but term life insurance reduces this risk somewhat.
Often the insurance contract itself specifies what the benefit your survivors receive may be used for. In many cases, this is the mortgage on the family home.
2. Compensate for a loss of income
Term life insurance can also provide relief for dependents in a lot of other situations, such as when it comes to a family with only one earner. If this earner dies, the family's monthly income is a whole lot lower, and that can cause financial problems.
Death benefit insurance, in that situation, serves as a substitute for that income. Thus, it can be used to pay off studies, debts and general expenses essential to the family.
3. Life insurance for business owners
Owners of a business or entrepreneurs who work together with a partner-owner also benefit from mortality insurance . Does one of the owners die? Then that person's next of kin have the right to claim his or her shares within the business. However, this carries a lot of risks for the company itself.
As a preventive measure, both owners can take out death benefit insurance on each other's lives. Specifically, if one of them dies, the death insurance benefit goes to the family of the deceased owner. As a result, surviving relatives can no longer claim the shares and the risks to the company are much reduced.
4. Getting a loan back
Finally, term life insurance can also be of interest because such insurance makes it easier to recover a loan from a family member. If that family member dies, recovering that amount is usually challenging.
If the person lending money has taken out death risk insurance on the life of the person to whom he lent, this does not pose a problem. So even within the family context, mortality insurance offers many opportunities.
Possible consequences if you don't purchase death benefit insurance
It is clear that taking out life insurance is a smart move in many cases, but what exactly happens if you ignore it? Although it is not compulsory in the Netherlands to take out death risk insurance, you obviously won't enjoy the benefits mentioned above either if you don't.
The main consequence of not taking out death benefit insurance is that your family or relatives may be in financial trouble after your death. This is, of course, because they will not receive benefits to compensate for a loss of income.
This, then, is immediately the biggest reason why people are increasingly taking out term life insurance: their dependents will have the necessary financial resources either way, and that means more peace of mind for both parties.