July 10th, 2018 | Updated on January 29th, 2020
Insurance sector is expanding day by day these days, due to the ever rising demand in the insurance market. It is not just restricted to the conventional whole life policies or term plans. You get multiple options to choose from. And these may be very confusing at the first instance.
It is very important that you understand each and every aspect of the Life Insurance Plan that you are interested in and then make a final choice. It may turn out to be difficult at the initial stage, but eventually when you start understanding the world of insurance market, things will become easy for you and you will end up choosing the best for your own self.
Your choice should not be influenced by the peer pressure, but should reflect your needs in true sense. It is not important for you and your cousin brother or best friend to have the same Life insurance plans. His and your needs may vary, and thus the decisions you make will not always be identical. Therefore, try not to get influenced by the peer pressure around you.
While deciding on any one life insurance policy you should take into consideration all the factors such as age, health, coverage, costs etc.
Choosing the best Life insurance plan for you is not a task that can be done all of a sudden. It is a gradual process and requires proper time and knowledge. Here are some key points that should be kept in mind while deciding which Life insurance Plan to opt for and which not.
Why do you need a life insurance plan?
The first question that should click your mind is why do you need a life insurance plan? What is the most important agenda behind buying an insurance plan? Is it the safety of your parents or the consistency of your business after your death?
Make a list of all these requirements on priority basis and then see which of the available life insurance plans fulfills these requirements in the best manner. Consult your family members before making the final move.
Estimate the amount of life insurance that you need
Nobody can ascertain the exact amount of life insurance that you need. It depends on what is your current salary and how many dependants do you have. If you are single and your major concern in your business, the amount of your life insurance plan will be smaller as compared to a situation wherein you are married and also have the responsibility of your kids and family along with the business.
Therefore, all these factors will help you decide the amount for the plan. No rule of thumb can be applied here! According to the financial professionals it is advisable to choose a policy that is worth between five to ten times of what you earn at present. If you want expert guidance you can get in touch with any professional financial planner. Preparing a list of all your assets and liabilities is a good exercise at this stage.
Make sure you do enough research work on the different types of insurance plans
Various types of Life Insurance Plans are available these days.
Whole Life Insurance Policy
It is one of the most expensive insurance policies offered to the policy holder. Along with the death benefit the insurer also gets the cash value. Your premium amount will stay constant until the policy is completely paid off.
The major drawback of this policy is that a huge amount of sum goes into the pockets of the middlemen (insurance agents’).
Term Plan
This type of policy is suitable for the individuals who prefer complete coverage during a specific period of time. The family of the deceased can claim the amount only if the death takes place within that particular time period. It is relatively cheaper than the Whole Life Plan.
Endowment Plan
The amount of money insured is paid to the family members if the death occurs within the specified time interval or does not occur at all. This type of Life insurance Plan also serves as a saving policy. Premiums charged here are a bit higher than the term plan.
Business owners choose this policy as they can earn profits in the form of bonuses under this insurance plan.
There are many other types of Life insurance Plans as well! After gaining knowledge about all the concerned types of policies the most appropriate way to figure out the best one is by making comparisons. Comparisons will help you eliminate the options as per your needs and preferences.
Be specific regarding the tenure of the life insurance plan
Just deciding the coverage amount is not important. The tenure of the plan is equally important. An individual must choose a policy that protects a person till the age he works. Not everyone wants to stop working at the age of 60 years. The policy should cover the individual till the age he retires. It is better to buy the insurance plans while you are young. The more the age, the more expensive the policy is.
Apart from the above mentioned points, there are several other factors that are important while understanding and selecting a right insurance plan for you. Take into account the inflation in the economy.
Never go for the nominal values, but rather prefer the figures in real terms only, that is, the ones which decide your purchasing power. You can make use of the internet to gain as much knowledge as you want to for choosing the insurance policy.
If you are planning to consult a broker, make sure that broker himself is well educated and is trust worthy. Buying a life insurance plan is a onetime decision and cannot be changed time and again. The process is not so easy but can be easily completed with full alertness and interest. Buy your policy now and enjoy the benefits for the entire lifetime!
