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Growth & Jobs | Insurance policies can be a good long-term saving strategy - Blagrove

Published:Tuesday | August 16, 2022 | 12:07 AM

INSURANCE POLICIES that carry an investment component are good for building resilience and are ideal as a long-term saving strategy for retirement.

That’s according to Othneil Blagrove, senior manager of sales at JN Life Insurance Company. “One of the purposes of the investment component of an insurance policy is to build financial resilience and is an ideal, long-term savings for retirement income. Consequently, persons should not hesitate when it comes to purchasing insurance that comes with an investment option,” he said.

Blagrove explained that life insurance is designed to offer financial safeguards against the death of the policyholder, but it may also work as a good investment plan, which helps persons to meet several life goals.

“Investing in a good life insurance plan can ensure that you have additional retirement income when you are no longer able to work. Also, it can act as a rainy day fund for items such as school fees, emergencies and other needs that may arise,” he stated.

However, the insurance executive cautioned that it should not be the only investment option in your portfolio.

“While we in the financial industry encourage persons to take out policies with investments, we also advise them to look at other forms of investment, since life insurance was meant to be used primarily for medical emergencies, or in the event of death. Therefore, it should form a part of your investment portfolio and not your only investment,” he outlined.

Blagrove explained that over the years, several policyholders have used their policies to accumulate funds to invest in the stock market or in other plans. However, he points out that whatever the reason, the funds represent a sound investment strategy.

He advised that despite having multiple uses, investments from policies should not be encashed unless there is an emergency.

“The funds that are built up on a life insurance policy are usually earmarked for specific reasons, depending on one’s financial goals throughout their life cycle. Ultimately, it provides retirement income, so a policyholder should seek to preserve it as much as possible. If they find themselves in a financially difficult position, one suggestion would be to use it as a collateral for a short-term loan. But using it prematurely must only occur when there is no other option,” he said.

Blagrove recommended that a policyholder should speak with a financial adviser before taking cash from their policy, so as to ensure that they avail themselves of the best option.

“The policyholder should contact their insurance adviser, who can advise them as to how they can proceed, as policies have different features. Persons may ask if they can repay what was taken when their financial situation changes. So, a needs assessment is always advisable before making a decision,” he explained.

He also explained that insurance policies offer advantages when they are allowed to grow, especially over the long term.

“In general, the longer you allow the cash value of the policy to grow, the more advantageous it is. When you purchase a policy, it is ideal to wait between five and 15 years before taking funds from that policy. Also, if you have a term life insurance policy with an investment option that goes up to 30 years, you can always encash the funds after that time or have it rolled over to another policy for even greater returns. People may be sceptical of this view, because there is the perception that only the insurance company will benefit. But the advantages of waiting and weathering this storm will be rewarding,” he advised.