You work hard and spend the majority of your life providing financial security to your family. In the unfortunate event of your untimely death, your financial responsibilities will be transferred to a family member such as your spouse or kids, who may not be ready for these challenges yet. They may face deep financial trouble. But life insurance guarantees financial security to your family after your demise, hence you should get an adequate-sized life cover as early as possible. The life of the family’s bread earner should be insured adequately during each stage of his/her life.
Let us understand why Life Insurance policy is a must for you and why you should keep on assessing it?
How life insurance can help?
Life insurance helps dependent family members to live without financial constrictions if the insured person dies unfortunately. If the bread earner (Insured person) dies suddenly, then the life insurance company immediately gives the sum assured as a death benefit to the registered nominee. Using the amount received from the insurance company, the family can continue their life without disturbing their financial plan. Responsibilities like child education, debt repayment, pension support for the spouse etc. can easily be fulfilled with the support of insurance payout.
Considering an estimate of your family’s life insurance needs
You must be aware of your financial responsibility at each stage of your career. When you begin your career, you should take a life insurance policy based on your medium-term responsibilities such as responsibility towards your parents and other family members. After marriage, you should reassess the insurance need and increase the insurance cover by considering the financial requirements of your spouse.
Similarly, after you have children, you should also consider the current and future requirements of your child such as education, career, marriage etc. and accordingly increase the life cover. While reviewing the Life Insurance cover size, always take into account all the debts, investment instalments, regular expenses and the expected inflation down the line.
There are a variety of Life Insurance products available in the market. You must select the policy which provides adequate cover as per your family’s financial requirements. Most popular variants of life insurance are traditional endowment policy, unit-linked insurance plan (ULIP) and term policy. In a traditional endowment policy, the premium includes investment and insurance both the portions.
Unit Linked Insurance plans are linked to the stock market, therefore you can reap the benefit of market’s performance.
A term insurance plan is a plain vanilla insurance option that only covers the life risk and so it provides death benefit to the nominee on death of the policy holder. It offers a high life cover with a low premium requirement.
ULIPs are suitable for investors who want high returns via investment and get the insurance cover too. If you are at the starting stage of your career, then you can opt any of these insurance plans. Term Insurance suits to people who keep their investment and insurance requirements separate from each other. It is better to get the Term Plan as early as possible in the career so that you can get adequate life cover by paying a small premium amount.
Remember, insurance need is different from your investment need. You must know your family’s financial requirement at each stage of life and adjust the insurance cover accordingly. Once you fulfil all your responsibilities and you retire, then your insurance need comes down to that extent. So, review your life insurance plan as per your family’s financial goal from time to time and do not forget to pay the insurance premium on time.