PREMISED on personal experience of having saved through banks and insurance companies, I take a view that saving for the medium to long term through insurance companies is better than other conventional methods.
How does it work?
Once you contemplate on how much you want to be saving on a monthly basis or using reverse engineering, you project how much you want to have after a certain period then you may engage an insurer.
I always want to share from experience.
About four years prior to my wedding, I thought of saving to make this once-a-life-time event remarkable.
I looked at the two common options available i.e. either through a bank account or a life policy.
For a start, I went conventional i.e. through a bank and admittedly, it was just unachievable because any immediate need that arose would compel me to withdraw from the bank with hope of replacing in future.
I kept on doing this until I thought of radically changing the strategy to a less flexible means, insurers.
I quickly checked around and was impressed with one particular policy I found at Professional Life Assurance Limited (PLAL) called Providence Universal Life Assurance (PULA).
This policy had two components; a life cover as well as a savings one.
I got the minimum death limit for compliance and started my monthly savings through paying cash to PLAL.
When I just started it was all smooth but along the way I started to struggle.
The issue with cash at hand is that it goes to immediate needs that arise and I mean genuine needs not wants.
The sales representative at the time advised me to change to a standing order so that my bank could be deducting directly from my account, thereby to ensure consistence.
This was probably a learning spot for me and I made sure that the subsequent policy I took was via a standing order.
Despite the struggles in my first policy I was able to save significantly compared to the first method of suing a bank.
Results could have been much better if I was consistent or was via DDAC or directly from payroll as I proved the next two policies I got.
With this little experience I can now consolidate my argument by pointing out some advantages of using insurance companies over conventional methods such as banks.
First of all, it is important to decide what you want to achieve with your savings. In my case above I wanted to save for my wedding. Others it could be to buy a plot, house, car or capital to start a business etc.
Well, the obvious advantage is that access to the money before the policy matures is very difficult. With a bank account, one can withdraw at will without any or with very little charges, while with an insurance policy there is a period during which one cannot withdraw for instance the first 12 months in my case or incur hefty penalties.
In as much as this may sound harsh, it will definitely help one achieve one’s set goals of saving.
The other advantage stems from the same point of the limited access to funds.
This means that those urgent and ‘genuine’ needs can be sorted out using other means leaving your savings funds untouched.
It is even easier to tell someone that you don’t have money if you are saving through an insurer than through a bank because access to the funds is not like going to an ATM to withdraw some cash.
When you have a standing order or paying via pay roll it instills some discipline on your part in the sense that money does not get to your pocket, thereby reducing the temptation of using it.
Interest earned is also higher from insurers. Insurers keep these funds for considerable periods enabling them to invest longer than banks.
As I end, for today, I will leave you with a question; what do you think about saving or investing through insurance companies? Share your thoughts or experience.
Comments: webster@picz.co.zm or webster@_tj@hotmail.com or on face book search for Insurance Talk-Zambia page or call/text 0977857055
(The author is a Chartered Insurer with 10 years industry experience)