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Why it is Important to Have Insurance and Annuity for Financial Planning

Insurance should be a very important aspect of anyone’s sound financial plan. 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. age economic circumstances and whether one has a family or not can dictate the kind of insurance chosen. annuity kind of policy would not be the best choice for instance for a young new worker .

An annuity can be defined as a type of policy that is issued by insurance companies and allows one to save money for retirement. One can either pay in this money in lump sum or in a number of small payments. 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.

Other people who can benefit from annuities are winners of lottery games and those who have won large cash payments. 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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Terms like accumulation phase and annuitization phase are commonly used with this policy. There is the first stage where one is just paying into the account and does not get any payments and it is called accumulation phase. The annuitization stage is when the client will start receiving some steady income from the account.
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Annuities are best for older more financially stable individuals. The reason for this is that one can be charged with penalties for premature withdrawals and the money is illiquid. Younger individuals are not suited for this kind of policy as most often require liquid cash in their daily dealings.

A young person has many other insurance policy options best suited to their day to day activities. Some of these policies have to do with insuring their young children’s future education, health insurance and also insuring their assets.

Regardless of age sound financial planning should be done by all. One needs to check carefully and choose the most suitable insurance policy for their circumstances. To get the best policy for your cost, it is good to goggle the many insurance companies before making that choice.

When you have a financial plan for the future, you give the best present to your family and yourself.