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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.
Life 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.
There are broadly four types of life insurance policies:
Term Plan – This 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: The Insured 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 specified Term (on its 'maturity') or on death.
There are other benefits that can be added to life insurance policy including Critical Illness protection
By 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 and likewise.
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.
While 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.