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You might know how Life Insurance works, but when it comes to making the decision to buy one, you might be getting apprehensive about it. To help you overcome this feeling and get a better understanding of things, let’s look at four different aspects of purchasing a Life Insurance policy.
Choosing the right Life Insurance plan for oneself can be a strenuous task when there are multiple options available in the market. Following are the most commonly offered Life Insurance plans.
What happens if you do not die?
People are apprehensive when purchasing Life Insurance because plans with no maturity benefits do not offer a repayment or the sum assured in case they outlive the policy term. Towards the end of the term, if you wish to continue with the plans, there might be an increase in the premiums that you have been paying. A better alternative would be to purchase a new plan. And if your aim was to cover obligations such as your child’s education or your mortgage, which you are done with, you can choose to let your plan expire.
How To Upgrade A Life Insurance Policy?
It is advisable to re-evaluate and upgrade life insurance policies annually, or after significant life events such as marriage, divorce, starting a family, and purchasing huge assets.
Life Insurance Riders are the most common way a policyholder can modify their plan. Some of them are as follows:
Alternatively, to address your changing financial goals, companies offer you the option to opt for a plan with better features by paying higher premiums within the policy term itself. This helps you avoid going through the hassles of purchasing and paying premiums towards a new plan.
Analyse your financial situation and determine the standard of living needed for your surviving dependents before purchasing a life insurance policy. Build sound knowledge and understanding of how each type of life insurance works and then compare between plans to see which suits you the best.
Why Do You Need To Buy Life Insurance?
- Life insurance can secure your family financially in case anything unfortunate happens to you. Life insurance ensures that your dependents can look after themselves and cope with the sudden loss of income and maintain their current lifestyle in case of your untimely demise.
- Some life insurance plans can be useful for saving and growing your money. You can avail of tax benefits for investing in life insurance policies.
- Life insurance money can pay off your pending loan amounts or any other dues in case of your untimely death, thereby saving your family from grave economic consequences.
- Life insurance policies that cover critical illnesses can be helpful when you head towards retirement. Some plans can cover you from severe ailments, such as heart attacks and cancer. These can be a life-saver after retirement when there will possibly be no alternate source of income.
What Are The Types of Life Insurance?
Choosing the right Life Insurance plan for oneself can be a strenuous task when there are multiple options available in the market. Following are the most commonly offered Life Insurance plans.
- Term Plans: The simplest type of life insurance policy with comparatively low premiums. It is valid only for a specific term. It pays your family the sum assured in case of your demise during the policy term. It does not pay anything if you outlive the policy term.
- Endowment plans: They offer a combination of insurance and savings benefits and can be further divided into participating, non-participating and unit-linked plans
- Unit Linked Life Insurance Policy (ULIP): A long-term investment option that combines investment with insurance. A part of the premium is used as risk cover while the remaining amount is available for investments.
- Retirement Plans: It helps you build a corpus for your retirement so that you can be financially independent after your working years. Your nominee receives the sum assured in case of your death during the policy term.
People are apprehensive when purchasing Life Insurance because plans with no maturity benefits do not offer a repayment or the sum assured in case they outlive the policy term. Towards the end of the term, if you wish to continue with the plans, there might be an increase in the premiums that you have been paying. A better alternative would be to purchase a new plan. And if your aim was to cover obligations such as your child’s education or your mortgage, which you are done with, you can choose to let your plan expire.
How To Upgrade A Life Insurance Policy?
It is advisable to re-evaluate and upgrade life insurance policies annually, or after significant life events such as marriage, divorce, starting a family, and purchasing huge assets.
Life Insurance Riders are the most common way a policyholder can modify their plan. Some of them are as follows:
- Accidental death benefit rider: Additional life insurance coverage on the accidental death of the insured
- Waiver of premium rider: Waives off premiums if the policyholder becomes disabled and is unable to work
- Disability income rider: Pays a monthly income if the policyholder becomes disabled
- Accelerated death benefit rider (ADB): Lets the insured collect a portion of or the entire death benefit upon diagnosis of terminal illness
Alternatively, to address your changing financial goals, companies offer you the option to opt for a plan with better features by paying higher premiums within the policy term itself. This helps you avoid going through the hassles of purchasing and paying premiums towards a new plan.
Analyse your financial situation and determine the standard of living needed for your surviving dependents before purchasing a life insurance policy. Build sound knowledge and understanding of how each type of life insurance works and then compare between plans to see which suits you the best.
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