“It is your responsibility to take care of your family’s financial needs when you grow up” is what we are often told. But equally important is to take care of your family’s financial needs when you are no longer with them. The first thing that comes to one’s mind for this is life insurance.
There are two types of life insurance:
- Term life insurance
- Whole life insurance
Now a question arises, which among these two is better?
The answer depends a lot on what are your needs and expectations from a life insurance cover, but if you were to ask generally, it is term life insurance which is better. Why? It has a low premium rate, and at the same time, it can cover a long period.
But buying an insurance plan is not a cakewalk.
So, here are a few things you must keep in mind while planning to buy term life insurance:
Understand What is Term Life Insurance
Before anything else, first, understand what a term life insurance is. It covers a certain specified period for which a person is insured, and on the occurrence of her/his death, the beneficiaries (family, in most cases) receive a cash benefit. It provides a sense of financial security to your family in your absence. If you are the sole bread earner of the family and have people dependent on you, it is a must to get yourself life insurance. It ensures a secure financial future for your family.
Many people buy life insurance plans to avail themselves of tax benefits. But we need to understand the real importance of buying a life insurance plan in these increasingly uncertain times.
Estimate the Amount You Need to be Insured
Not every size fits all.
Every person has different financial requirements. Everyone is earning a different amount and spending differently. So you need to understand your requirements depending on your current earnings, future earnings, loans, and other liabilities and then choose the perfect one for you.
The amount you need to be insured also depends a lot upon at what stage you are buying term life insurance. If you are in an early stage of your life, you need a larger amount to be insured and vice versa.
Know the Right Time When You Need an Insurance
It is a generally accepted view that you must buy insurance as soon as you start earning and supporting your family financially. But at the same time, it must also be taken care of to increase your financial stability in your absence; you don’t risk it now. An insurance policy adds to your monthly expenses and can be a burden if your earnings are not stable. So to sum it up, you must always consider the cons of buying an insurance plan at any stage in life.
Understand What All is Being Offered
A term life insurance policy does not only insure the death of a person. There are more comprehensive plans which also include insurance for critical illness, accident, disability, etc. So, it is of utmost importance to first understand what all a person is insured for.
Choose Flexible Payment Options
It is a preconceived notion that an insurance premium has to be compulsorily paid in regular installments at regular intervals. Not many people know that there are also options for flexible payment options. So always look for all the available options for payment.
Decide the Tenure for Which You Need an Insurance
It is believed that if you are in your 20s and 30s, you must buy insurance for a period exceeding 20 years. On the contrary, if you are nearing your retirement age, you can buy a plan for 20 years or less.
Also, do not forget that the longer the period of insurance, the more the premium amount.
Be Sure About the Insurer
Life insurance is quite an important thing as compared to any other insurance. So, you need to be extremely sure about the insurer. Check the market standing, solvency ratio, reputation, and financial background of your insurance provider.
Keep Reviewing Your Needs
As the world changes, so change the needs and requirements of all the people. As your income changes, a lot changes within your family. So keep reviewing the needs of your family aligned with the insurance plan and upgrade your plans if you need to.
In case of an additional financial liability also, you need to review your policy, as securing the financial future of your family at the cost of risking their present is not right.
Nobody will ever want to see their family in a position of financial instability. For that, we must all do all that it takes to safeguard their future by making a little more effort and buying the best term plan.