Life insurance provides the financial resources your family may need to
pay immediate and continuing expenses when you die. It thus protects
your family from future financial uncertainties in case of your
unfortunate early demise. Buying a life insurance is an important
decision and it needs to be taken with some background understanding.
Here are some basics you should know about life insurance before you buy
one for you.
1) How Much Life Insurance is Needed?
insurance needs of each customer are unique and different. By seeking
some inputs from you, a financial advisor will be able to guide you on
your life insurance needs. You just need to tell the financial advisor
about your expenses and sources of income and he can guide you on a
number that should suffice your needs. There are online calculators as
well which will help you ascertain your needs. 2) What are the Different Types of Life Insurance Policies?
There are broadly four types of life insurance policies:Term Plan –
is a plain vanilla insurance Policy
and the Premium
you need to pay for
such a policy is the lowest for a given amount of Risk
coverage. It is
suitable for those who cannot afford high annual premiums and do not
intend to combine savings with insurance.Unit Linked Insurance Plan (ULIP) –
These plans combine investment with insurance. A small part of annual
premium payable goes towards life insurance cover while the rest is
invested in equity/debt depending on individual discretion / preference.Money Back Plan:
is promised a minimum sum Assured
which is paid by insurance
company at regular intervals. Such plans are suitable for people looking
to save through insurance plans. In case of early demise of the insured
the entire Sum Assured
is paid out.Endowment Plan:
Unlike a money back plan which pays sum assured in part at regular
interval, an endowment policy is designed to pay a lump sum after a
(on its 'maturity') or on death.
There are other benefits that can be added to life insurance policy
including Critical Illness
choosing to buy critical illness rider, you can gain additional
financial protection in the event of being diagnosed with a critical
illness. The diseases that are classified as critical illness in most
policies include cancer, organ failure, heart attack, stroke, paralysis
As these illness can take a significant toll on
your qualify of life and your ability to earn, the insurance company
will pay out a lump sum benefit that will help you to take care of your
bills and expenses.Failure to Pay Premium May Lead to Lapse of Policy
buying a policy make sure that the premium you need to pay is not a
stretch and you can afford on a continual basis. If you do not pay the
premium within stipulated time frame, which includes the Grace Period
after due date your policy Coverage
lapses. You can revive a lapsed
policy by payment of accumulated premium along with the interest cost on
the same and undergoing a heath check up.
It you are planning to insure your life, keep this information and life insurance tips in mind.