alexa

Search in Indianmoney's WealthPedia

Home Articles Why Buy Life Insurance

Why Buy Life Insurance

IndianMoney.com Research Team | Posted On Saturday, February 16,2019, 09:58 AM

5.0 / 5 based on 1 User Reviews

Why Buy Life Insurance

 

 

Life insurance is a financial protection for any unavoidable event that is inevitable with human life like death, physical impairment, accident and retirement. Human life is always subject to risks of untimely death and disability as a result of natural or accidental causes. There is a loss of income to the family when human life is lost or permanently/ temporarily impaired.

Human life cannot be valued. However, a lump sum can be determined on the basis of loss of income in the upcoming years. In life insurance, the sum assured that would be paid on the event of loss of income is called as ‘benefit’. Life insurance policies offer a predefined sum of money in case of any untoward event happening to the policyholder.

Want to know more on Term Life Insurance? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

Why Buy Life Insurance

Why you should buy Life Insurance:
Each human faces the following risks:

  • Untimely death
  • Living a long life

Life Insurance is needed:

  • To financially secure your family’s future on the event of untimely death
  • To fund children’s education plans and other similar needs.
  • To have an investment plan for future that has constant source of income post retirement.
  • To make sure that you have other sources of income, when there is a loss of income due to illness or physical impairment.

Who needs Life Insurance: Basically, the breadwinner of each family must avail life insurance. With homemakers contributing so much to the family, they too must avail a life insurance policy. Children too maybe considered for insuring their life as their potential future income is at risk.

How much Life Insurance is needed:
The sum assured would depend on the following factors:

  • Number of direct dependents you have.
  • The kind of lifestyle your family leads.
  • Expenses of your children’s education.
  • Your investment strategies.
  • Your affordability.

You must seek assistance from an insurance agent / broker to avail insurance, and insist on the right insurance policy.

SEE ALSOWhy Buy Life Insurance

What Life Insurance to Buy

Kinds of Life Insurance Policies:

Term Insurance: You can avail protection over a pre-defined period of time with term insurance. On death of policyholder, nominee / beneficiary would receive death benefits from the insurer. If the policy holder survives the term, there are no survival benefits.  

Whole Life Insurance: In whole life insurance, you are insured for a lifetime. Insurer pays out death benefits on any event that cause loss of income to the family which includes death or any untoward incident causing permanent or temporary disablement.  

Endowment Policy: Endowment policy is a savings linked insurance policy which has a specified maturity. On any untoward incident that causes death or physical disability, the insurer pays out sum assured to the nominee / beneficiary. If the policy holder survives the predefined term of the policy, then the maturity proceeds would be paid out.

Money-Back Policies: Under a money back policy, a certain percentage of the sum insured is paid out to the policy holder on a periodic basis as survival benefits.  When the term expires, the remaining amount is paid out as maturity proceeds. 

Children Policies: These policies are applicable on the life of a parent for the benefits of the child. With children policies, parents get funds which help them plan various life events. Few insurers waive premiums payable in case of unfortunate death of the parent/proposer within the term of the policy.

Annuity (Pension) Plans: Retirement benefits like employee provident fund, gratuity and so on are paid in lump sum. This lump sum amount is often spent immediately. Retired individuals find it difficult to meet expenses as there is no regular income. Therefore, pension is the best method of retirement planning as it offers regular income. It is only wise to invest in annuity plans while earning. You can be financially independent by investing in annuity plans.

Unit Linked Insurance Policy

ULIP stands for unit linked insurance plans, is a fine mixture of insurance and investment. Here policyholders pay premiums on monthly or annual basis. A small portion of the premiums paid goes toward life insurance and the rest is invested in investment instruments like mutual funds.

SEE ALSO: What Life Insurance to Buy

How to Buy Life insurance and From Whom

Insurance Intermediaries

  • Insurance is an important financial product that promises to compensate the insured or third party, as per the specified norms of the policy. In majority of the insurance transactions, there is an intermediary or an insurance agent / broker.
  • An insurance intermediary serves as a bridge between insured and insurers.
  • Insurance agents / brokers are authorized by IRDA, Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, established in 2002.
  • Insurance agent or broker plays a very critical role in the entire life cycle of insurance product from the point of sale through policy servicing and up to claim settlement.
  • IRDA has laid down guidelines to protect the interests of insured, casting obligations not only on Insurers, but also on insurance agents.

Directly from insurers

  • Individuals seeking to get insured, can get insured directly with the insurer, without the help of Intermediaries.
  • This can be done both online and offline.
  • For offline method of availing insurance, individuals must visit the branch of the insurer with the requisite documents.
  • Fill the offline application, attach the attested photocopies of the documents and submit.
  • You will get a hardcopy of the policy.
  • For online method of availing insurance, you must log on to the official website of the insurer.
  • Fill the online application form. Upload the requisite documents in the prescribed format and submit the application form.
  • You will get a softcopy of the policy.

Do's and Dont's for Life Insurance

 Do's

  • Understand your requirements and list down what you expect from a life insurance plan.
  • Know about different policies available. Research on the policies and understand their method of working. Compare different policies and pick the most suitable one for you.
  • Fill the application form carefully. Don’t make any mistakes while filling it. Give right details. Furnishing wrong details may cause problems at the time of claim settlement.
  • Keep a copy of the completed application form you sign and any declarations and terms agreed mutually for your reference.
  • If you are availing Unit Linked Insurance Policies (ULIPs), then you must ask specific questions about:
    • Various charges
    • Fund options
    • Switching of funds
    • Benefits if you 
      • Discontinue the policy
      • Surrender the policy
      • Make a partial withdrawal of funds.

Dont's:

  • Don’t leave any column blank in the application form.
  • Don’t allow insurance agent to fill form.
  • Don’t make any mistake or give wrong details. Doing so will have consequences at the time of claim settlement.
  • Don’t miss or delay paying premiums.

General Advice for Life Insurance

 When you decide to avail an insurance policy:

  • Check if the insurer is registered under IRDA.
  • Make sure you buy the insurance policy through an authorized agent or broker.
  • Ask for an identity card or proof of license issued by IRDA.
  • Read the policy brochure/ prospectus without fail and get to know in and out of the policy.

You May Also Watch

Iframe Content

Keep your Financial Cognizance up to date with IndianMoney App. Download NOW for simple tips & solutions for your financial wellbeing.

Have a complaint against any company? IndianMoney.com's complaint portal Iamcheated.com can help you resolve the issue. Just visit IamCheated.com and lodge your complaint. If you want to post a review on any company you can post it on Indianmoney.com review and complaint portal IamCheated.com.

Be Wise, Get Rich.

What is your Credit Score? Get FREE Credit Score in 1 Minute!

Get Start Now!
CIBIL Meter
Get It now!
Attention!

This is to inform that Suvision Holdings Pvt Ltd ("IndianMoney.com") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.