Life Insurance is a contract between you and a life insurance company, which provides your nominee with a pre-determined amount in case of your death during the contract term. Buying insurance is extremely useful if you are the principal earning member in the family. In case of your unfortunate premature demise, your family can remain financially secure because of the life insurance policy that you have purchased.
The primary objective of life insurance is to protect your family in the event of death. Today, insurance is also seen as a tool to plan effectively for your future years, your retirement, and for your children's future needs. Today, the market offers insurance plans that not just cover your life, but at the same time grow your wealth too.
It depends on the policy you opt for. In order to buy a life insurance policy, you must pay premiums to the life insurance company. The amount of premiums payable depends upon the type of policy, policy term, sum assured, and your age.
You could pay the premiums monthly / half-yearly / annually or as a single premium.
The simplest rule is to assume that insurance is a replacement for your lost earning capacity. Calculate your total income for the years that you expect to work.
Assuming that the prevailing interest rate is 8%, you need to insure your life for at least 12 times your current annual income. Assuming that your family needs Rs.10000 annually for household expenditure and the rate of interest would be at 8%, then you need to have a life insurance policy of approximately Rs.120000. If the insurance amount is deposited in a bank by the family, they will get Rs.9600 p.a., which will at least let the family to comfortably lead the current life style.
An endowment policy is a combination of savings along with risk cover. These policies are specifically designed to accumulate wealth and at the same time cover your life. In simple words, these polices are issued for specific period during which you pay regular premiums. In case of unfortunate death during the tenure of the policy, your beneficiaries will receive the sum assured along with the accumulated bonus (if any). If you survive till the end of the policy term, you will receive the sum assured along with accumulated bonus (if any).
Term insurance, also known as pure life cover, is the cheapest and the simplest form of insurance. Under this insurance policy, against payment of regular premiums, the insurer agrees to pay your beneficiaries the sum assured in event of your premature death. However, if you survive till the end of the policy term, nothing will be payable to you. This policy has no savings component and the premiums you pay are purely the cost to buy you life cover. The premiums paid for a term policy is very less as compared to the endowment policy. This is beneficial for people those who are under lower income group.
Yes, a money back policy will do. This is an anticipated endowment policy with an additional feature of receiving a benefit at regular intervals during the tenure of the policy. The risk cover continues for the entire sum assured in spite of the installments already paid. If you survive till the end of the policy term, the balance sum assured along with accumulated bonus will be paid to you.
Riders are additional benefits that can be attached to your life insurance policy. These riders give you the benefit of increasing your risk cover in case of certain events happening. For instance, if you have taken the “Accident Death Benefit” rider and in case of death by an accident, your nominees can get up to a maximum of twice the basic sum assured or a specific amount depending upon the policy terms.
Yes. The premium that you pay on your insurance policy is mainly dependent upon two things - your age and the tenure of the policy. The younger you are, the lower is your insurance premium amount. At younger age, you would be physically sound and may not be suffering from any illness. This would entitle you to pay lower premiums for the policy. Therefore, it is advisable to buy a life insurance policy at an early age to reduce the cost of insurance.