Life Insurances 238 views
Buying an insurance policy is your personal choice. But, most of us have seen that once you start working and you have a regular source of income you want to invest your money somewhere. Generally, you buy a policy to save your income tax. Life insurance policy is a kind of investment tool, which not only gives you investment benefits, but it also secure your life or your family after your sudden/accidental death. It helps your family and dependents financially after your dismissal. Life insurance is one of the most vital pillar in personal finance. Most of us buy at least one or more more policies. There are many reasons behind buying the life insurance policy and most important is financial security to your family in your absence. If you talk to your family or friends regarding the personal finance, the first thing they will suggest you is to buy a policy that will give you good returns after tenure completion. Besides, these common known facts and reason, one should know some important things before buying the life insurance policy.
Review your insurance needs: Before you buy any insurance policy, you should talk to insurance agent about your insurance needs and your financial expectations from your insured money. Insurance agent can help in evaluating your needs and can give you information about the most suitable plan according to your needs.
Decide how much coverage you require: This is another thing, which you should decide forehand. What is the portion or share of money you want to invest in your policy? Does anyone in the family depends on you financially? How will your family pay final expenses and repay debts after your death? Based on the questions, decide how much coverage you need, for how long and what is your affordability? You should ensure that your sudden/unexpected death will not affect the financial cycle of your family in your absence.
Evaluate your present life insurance policy: If you have already bought any life insurance policy, you can compare the benefits of your present policy and new policy. If your new policy is giving you higher and better coverage, there is no need to cancel the previous policy. Besides, you can ask your insurer to change your policy to get the better coverage or give you the kind of benefits you expect.
Compare different policies before you buy: Generally, there are two types of insurance policy: term plan and cash value insurance. Term insurance generally has lower premium in early years, but it is not a good option if you want to increase cash value. Cash value life insurance may be one of the several types: whole life, universal life and variable life. Your decision should be based upon the kind of value or funds you require in future and what kind of growth you want in your invested money. You should also consider that most suitable amount you can afford to pay as premium of your policy.
Check affordability: Before, buying any insurance policy this is one of the most important questions you should ask to your self. You are your money manager and you know your funds better than anyone else. You know how much money you can afford to pay as premium of the insurance policy. Can you afford higher premiums? Can you invest 20% of your funds into paying the insurance policy premium year-after-year? If your financial liabilities increase in future, will you be still able to cope up with the premium amount?
Does the insurance agent explained you the future of the policy? While buying the policy you should know about your fund value and what will be the assured some you are going to receive after maturity of the policy? Some policies have risk factor as well if your money is invested in different funds. In that case, you should ask the insurance agent what will be the assured value in your policy and what are the risk factors? Always ask your agent to give you exhaustive information about the risk and benefits of the insurance policy.
Read policy terms and conditions carefully: Do the policy premiums and benefits vary from year to year? When will you receive your money after paying complete premiums? What will be the mode/frequency of payment from insurance company? What is the percentage of risk in your maturity amount? What will happen if you will not pay the whole premiums? If you miss two/three premium payments, how it will affect your assured amount? To find out answers to all these question you should read the terms and conditions of the insurance policy in detail. If you find that it is not giving the expected benefits you can cancel the policy within the 30 to 45 days after buying it.