Rohit (28) decides to purchase a life insurance plan that would protect him and his family members against contingencies in life. So he begins his research online. He has several questions he is seeking answers to. What is the objective of life insurance plans? How much insurance do you need? He comes across an article which explains 5 important points about life insurance plans which one should keep in mind while deciding on which one to buy.
Let’s take a look at the article Rohit read:
Life insurance is one of the pillars of personal finance, deserving of consideration by every household. Yet, regardless of its nearly universal applicability, there remains a great deal of confusion, and even uncertainty, regarding life insurance plans. But by simply consulting a trusted advisor and getting proper information, you can simplify the decision-making process and arrive at the right choice for you and your family.
Here are the 5 things you need to know about life insurance:
- If anyone depends on you financially, you need to opt for life insurance. It’s nearly obligatory if you are a spouse or the parent of dependent children. But you may also need life insurance if you have dependent parents or have dependent siblings. The policyholder is allowed to add a beneficiary or make changes later if needed.
- Life insurance does not merely apply a fiscal value to someone’s life. It helps to compensate for the unavoidable financial consequences that accompany the loss of life. Strategically, it helps the surviving members the costs of funeral expenses, outstanding debts and mortgages, educational expenses of children and acts as an income replacement.
- A term plan is the simplest, the least expensive and the most widely applicable variety of life insurance.
- The answer to how much insurance you need doesn’t have to be complicated. Knowing the current life stage, simply calculate your current expenses, the rate of inflation, your growing responsibilities and liabilities. It is recommended that your life cover should be at least 10x of your annual income. Term of the plan is another factor that needs to be considered while calculating this.
- Know your options when cancelling an existing life insurance policy so you don’t leave money, or coverage, on the table. If you have a policy that isn’t apt for you or you simply no longer need it it’s vital to proceed sensibly. Foremost, if you understand that you have overpaid for a policy that doesn’t meet your needs, but you still need life insurance, don’t cancel it until the new policy is in place.
After reading the article Rohit realized the importance of life insurance plans and the factors to consider when choosing/buying one. He also accepted that life insurance is an important part of every individual’s long-term and comprehensive financial plan.