Even a mere thought of untoward incidents like accidents or death causes mental distress. This is because these events not only cause stress but also affect your earnings, and worsen your finances. Availing a life insurance policy provides the monetary protection that your loved ones need in case of such unforeseen events. Learn a little more about life insurance and gain from all the knowledge you need in order to apply for your first insurance.
WHO NEEDS TO BUY LIFE INSURANCE?
Whether you are a single or married, if you have loved ones who depend on your income, you should buy a life insurance policy. Imagine a scenario where you meet with an accident and are advised bed rest for a year. With no income and added medical expenses, your family will be in a lurch. There are also tax benefits: Your premium paid earns you deductions under Section 80C. However, tax-saving motives should always be secondary while buying life insurance. The priority should always be financial protection for your loved ones.
DO YOU NEED INSURANCE IF YOU HAVE NO DEPENDENTS?
Even if you don’t have dependents, it is essential to buy life insurance to protect your own interests. For instance, when you have overdue debt, in case of your demise, instead of passing on debt-free assets to your heirs, you will have to pass on a liability.
Life insurance protects both your life and your home without you having to shell out extra bucks. Often, loan protection plans (a form of term insurance) are sold alongside home loans in order to protect the borrower’s family as well as the lender from the untimely demise of the borrower.
WHY SHOULD MY FIRST POLICY BE A TERM PLAN?
A term plan offers significant coverage for low premiums. It is an affordable option suiting those whose budget is limited. A term plan only offers risk coverage. Since all your premiums are collected only for insurance, your dependents will have adequate financial coverage in your absence.
To make this simpler, here’s an example: A 25-year-old non-smoking male can get a term life insurance coverage of Rs 50 lakh for up to 60 years by just shelling out Rs 300-Rs 800 as a premium every month. This minimal amount will not at all cause any serious damage to your finances but will only serve to secure your loved ones.
SHOULD I CONSIDER OTHER LIFE INSURANCE OPTIONS?
Apart from term insurance, you have several other options for insuring your life. Whole life insurance Policy (covers your whole life, sometimes over the age of 100); unit-linked insurance policy that provides market-linked investment benefits; endowment policy that provides low-return savings; children’s plans that intends to solve saving for your child’s future; money-back policy that returns part of your sum assured at fixed intervals. All these options provide you investment benefits, which term insurance won’t. However, while buying these products you must judge them for returns potential, liquidity, and charges.
THINGS TO LOOK FOR WHEN BUYING YOUR policy
There are five things you need to keep in mind while getting a term plan.
1) Get a policy with an adequate sum assured. Ideally, it should be 10 to 20 times your current annual income. So, for example, if your current inco-me is Rs 5 lakh, your sum assu-red should be Rs 50 lakh to Rs 1 crore. The sum assured should also be able to cover any loans or liabilities you have.
2) Pay attention to the policy tenure. It should cover you for at least your working life. So if you are 35, the policy should cover you for at least till you retire at 60.
3) Compare policy opti-ons, not just by premium but also by features.
4) Go to an insurer with a good claim settlement ratio (CSR).
5) Before you sign the dotted line, take 30 minutes to go through the policy brochure and ask relevant questions about it to the seller.
HOW SHOULD YOU BUY A TERM PLAN?
The right way to buy a term plan is to go online, compare different term insurance plans, and buy the one that offers value for money. Buying a term plan online is simple and easy. It saves time, energy, and increases your awareness via easy comparison. With this guide you are sure to avail the right insurance and take a responsible step ahead.