Why it is Important to Have Insurance and Annuity for Financial Planning . Every sound financial planning should not leave out the aspect of insurance. When certain occurrences like death, sickness, accidents occur, it is important that one has insurance to protect them and their loved ones. there are factors that can guide one on the kind of insurance policy to choose from. Some of these factors are age ,family size and one’s economic situation. a fresh new worker would for instance be advice not to go for annuity kind of policy. Insurance companies issue a type of policy called annuity that allows a person to save up money for retirement. Small cash payments can be made in this kind of policy or one can choose to do a lump sum one off payment. Your contributions are guaranteed to earn interest over time according to the interest agreed upon. The good thing about having an annuity is that one is guaranteed a stream of income after a period of time. Another group of people who can have an advantage with having annuities are those who have won large cash settlements either in court cases and also those who have won the lottery. In this case, these large sums of money can be turned in to a steady cash flow that can be disbursed as agreed upon by the client and the insurance firm.
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The two commonly used terms with this policy are accumulation and annuitization phase. The accumulation phase is when one is doing the contributions and payments have not started. The annuitization stage is when the client will start receiving some steady income from the account.
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The people more suited for annuities are the older and more financially stable individuals. This is because the money saved is illiquid and one is subject to withdrawal penalties. It is therefore not suitable for younger individuals who constantly need liquid money. Younger individuals can however go for insurance covers best suited for their day to day lives. The young individuals have a host of other issues that need to be insured such as their young children’s education, their family health and also their assets. It is therefore wise to say that financial planning is important to all regardless of age. One needs to check carefully and choose the most suitable insurance policy for their circumstances. Since there are many companies offering insurance policies, it is good to do a thorough search first on the best one. When you have a financial plan for the future, you give the best present to your family and yourself.