Life Insurance
Insurance, today, is no longer limited to traditional term plans or policies for life. The opening of the insurance sector in the last decade has brought businesses, offering a variety of choices with a range of features of the plan. This could be a normal life cover or a pension plan with regular income flows , or money back policy for family commitments
So one should you opt for ? Here I will give you an easy guide to help you through the process.
Do you have loved ones who depend on you financially? , If your answer is "yes" then you should definitely opt for life insurance.
A look at why is is it needed:
- Financial support for your family in case of your unfortunate demise.
- An investment tool to save money for your children's education, marriage or retirement.
- Can be a great tax saving option.
Where to Begin?
Knowing what your need and an understanding of your financial situation helps you choose the right plan. Here's how to go about doing this .
Evaluate Your need for insurance
List out your requirements on a priority basis . Life insurance should be at the top of this list. You can also aim to save tax money or you may require a financial commitment toward the future .
Understand your current assets and liabilities
Your current assets and liabilities would help you assess how much insurance you would need. You can these questions to yourself to help you decide:
1. What is my family's current lifestyle expense?
2. What do they inherit When I am no more?
3. Definite expenses in future: such as marriage or education of children.
When to buy insurance?
Individual insurance needs change with every stage in life. However, the known fact is that the earlier one buys a life cover, the cheaper it works out for him. So buying life insurance even if you are a young professional currently are is a wise option.
Shopping for the right one
The following details will help you understand which type of insurance plan would suit you best.
Term Plan
Basic feature: Life cover for a limited period. Claim is paid to the family, only if the assured dies Within the insurance term.
Cost and premium Collected: Low cost plan. Premium is Collected till the end of the insured term.
Suitable for: Individuals seeking complete risk cover During a specific term, with no element of saving or investment.
Whole Life Plan
Basic Feature: Life cover for the whole life. Claim is paid to the family on death of the assured, irrespective of when it happens.
Cost and premium Collected: Cost of plan slightly more than term plan. Regular premiums to be paid till retirement or death of Either the single.
Suitable for: Individuals seeking complete risk cover During a specific term, with no element of saving or investment.
Endowment Plan
Basic features: Sum assured paid to family policy if the policy holder dies During term, or if policy holder survives the policy term Entire.
Cost and premium Collected: Higher than the Earlier plans, as esta comes with a savings element attached. Premiums are higher than term plans, as a part of the premium is used to generate profits or bonuses.
Suitable for: Individuals desiring additional savings in the form of bonuses and profits, Along With the sum assured.
ULIP
Basic features: Combination of a life insurance and a mutual fund. Returns on maturity Could Depending on the performance vary of the underlying fund. On death nominee Receives The sum assured or fund value whichever is higher.
Cost and premium Collected: Most expensive of the plans. Premiums are higher as a part is used to invest in a fund, and to cover part for life.
Suitable for: suitable for people with a high risk appetite seeking insurance cover and wealth creation requirement.
Important Things to Remember
-After You have DECIDED on the right kind of insurance, do a comparative study of a similar policies by different companies being offered Preferred.
-Ensure your premium amount and premium frequency is within your ability to pay.
-Check With the insurance company on the additional benefits offered preferred, such as an accident rider, a rider critical illness or maybe an option later to convert an existing term plan to a whole life plan.
-Read The fine print on the policy and ask the company Carefully or your agent to Explain Anything That Is not clear to you, before you sign the offer document.
Conclusion
It pays to review your income and needs Changes, if any, Regularly, to ensure that you're getting the MOST out of your life insurance.
Section 80C of the Income Tax Act Provides a tax benefit on the premiums of Life Insurance and Pension Plans policies. The benefit Utilized May be better if you enter the insurance plan at the beginning of a financial year.
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