The Benefits of Life Insurance that Are Worth Considering
What is Life Insurance?
Life insurance is a type of insurance that pays out a sum of money in the event of the insured person’s death.
There are different types of life insurance policies, and they are not all as simple as one might think. The most common types include whole life, universal life, term life, and variable universal life.
Universal Life Insurance is an investment-linked policy that combines a savings account with a death benefit. Term Life Insurance is only for a specific period of time and will pay out if you die during that time period. Variable Universal Life Insurance is an investment-linked policy with the option to vary premiums or withdraw cash from the policy at any time without penalty.
The benefits that come with each type are also different: Whole Life provides coverage for your entire life; Universal Life provides coverage for your entire lifetime or until you reach retirement age; Term provides coverage for a specific period of time before it expires; Variable Universal Life provides coverage for your lifetime or until expiry.
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Why Should You Get Life Insurance?
Life insurance is a type of insurance that provides financial protection against the risk of premature death. It is one of the most common types of insurance coverage in the world.
In India, life insurance is mandatory for people who are employed or retired and have dependents as per Section 43D of the Income-tax Act 1961.
People who do not have any dependents are also eligible for life insurance if they are under 60 years old and earn more than Rs 50,000 per month.
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What is Universal Life Insurance.
Universal life insurance is a type of life insurance that provides coverage for a person throughout their lifetime. Unlike term life insurance, which only offers coverage for a specific period of time, universal life offers protection for the insured person’s entire lifetime.
Universal life policies are designed to offer flexibility in the structure of premiums and benefits. The policyholder has the option to choose between fixed or variable rates, or even to combine both types.
How to Choose the Best Life Insurance Policy for You and Your Family
It can be confusing with so many options available at your door to choose from so many networks and references while zeroing out on a particular product which will benefit you and your family during time of crisis. However, we have listed out some very important checkpoints to buy an insurance;
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Evaluate your current financial state:
Check your dependents, like your children, his current age, whether he is a minor or into his teens, your spouse, your parents and finally you total net-worth and liabilities. This would include like your emergency fund, any life insurance coverage through your company you work and retirement savings. You will be surprised that you are not as prepared for the uncertainties of the future as you have thought earlier. A financial planner can set your goals, your needs and analyse your risk areas.
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Find out how much coverage is enough for you:
In reality people often underestimate or overestimate their insurance cover. This later on puts them into trouble when they actually need. People always prefer to do it with just enough to meet their needs at that point in life and overlook the future scenarios. One rule of thumb is to have an insurance policy with death benefits at least 10 times that of the current annual salary. However, your own financial goals and aspiration are also to be considered. It is here a financial planner will give an expert guidance.
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Select a Life Insurance policy type:
You may be prompted to select the endowment type life insurance policy. Whereas there are other types of insurance policy like the term life insurance or Whole life insurance. These provide a life cover for your family for a specific period like 15, 20 or 30 years. These are super affordable when you are living with huge liabilities. The endowment type life insurance policy are bit dearer because they build your assets to give you a cash value and will pay you back post your retirement or as the policy matures.
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Determine the limiting factors for the Insurance Rates:
Mostly the age and health condition of a person are gauged by any insurance companies while giving the client a particular insurance policy. The younger you are the cheaper is the policy. That is because at younger age you are more healthier and have better life expectancy and therefore less risky to insure. The rate will also depend upon the type of policy, cover for death benefit, and any other medical condition and the term of the policy.
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Compare the rates of different insurance companies:
You will need to assess the rates of various insurance policies for the same cover you are in need and then decide which suits you best to your budget.
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Look for Value you get than the Premium:
The insurance policy premium should fit on your pocket after all you would not treat it as a burden and can’t afford to pay the premiums in future. However, insurance premium should never be the only deciding factor for your selection. Pay special attention to the guaranteed vs non-guaranteed parts of the policy illustration. Always select the company with higher solvency ration and best claim settlement ratio.
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Never shy away from question put by insurance companies:
Answer diligently to the questions of insurance company. This may include your age, weight, personal medical history, mental state, family medical history. They may check your food habits like you smoke or not, drink alcohol or not, your driving records and your current job categories. All these will form basis for your insurance premiums and will help in easy claim settlement.
This is a lot of stuff for you to consume. Take time to grasp and think wisely before putting your money in the basket.
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