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Buying Life Insurance is vital to the financial security of your family

Our future is not at all secured and those who are aware of this fact know that it is important to keep planning. Our finances and our family form the pivot of any future planning.

Life insurance is an emergency amount by which you can secure the financial prospects of your survivors in case of economic distress in the eventuality of your death. Buying life insurance safeguards the family income even though the bread earner's salary stops.

Corporate houses also buy life insurance policies in the name of their top employees to safeguard against any financial losses they may incur in the eventuality of his or her death. Life insurance is a cover that can also provide an amount to settle loans or credit payments to protect the family home or to cover funeral expenses and inheritance tax etc. when the insured person dies.

Life insurance is of two major types:

1. Term insurance: These are trouble-free and the most low-cost life insurance product. It ensures financial protection for a demarcated span of a person's life, after which it lapses. Here you pay for the cost of the policy annually and the amount increases every year as you life expectancy declines. These policies can be renewed annually. Some of them also have level premiums for a set period of time say one to ten years or a demarcated age.
2. Investment type policy: These are whole life insurances and provide financial cover as long as the insured lives. They are more popularly called the "ordinary" life insurance. They usually involve a level premium and in the first few years the amount is higher than in term insurances. However, since it is level, the premium amount may eventually be lesser than term insurances. It also accumulates a cash value, which buyers can surrender and convert to cash. Repayment of whole life or investment type insurance is done in two ways: Either for a fixed number of years on a limited-payment basis or by settling the premiums at once with a single payment.

Points to remember while buying life insurance

Buying life insurance is a serious matter as it deals with the future of your finances and your family. Hence, before you take the plunge it is very important to know about the nitty-gritty of this financial product.

  • Policy planning
Know you family requirements before you are buying life insurance. Do some homework and do not rush to the first company you hear about. Study the policy returns and other advantages.

  • The right agent or company
Choose an agent or a company that you feel confident about, after doing some market study for their reliability. Check insurance companies for stability and propensity to bankruptcy. You must check out their license details.

  • Policy cover
Be very sure what the insurance plan provides, to avoid unnecessary coverage. Tell your agent to explain everything in details so that you are confident of what you are buying. Do not sign before that.

  • Exchangeable policy
If you have bought an exchangeable policy, know its details. You can convert this type of policy with another policy later without furnishing added proof of your insurability.

  • Loan clause
If there is a loan clause in your policy then you can borrow from its accumulated cash value. Also, check its tenure and interest rate.

  • Premiums
Check on your type of premium; whether it is fixed or variable. You should be aware about the amount you have to pay up and the deadlines too. Check if it increases with inflation. Even if you company does not provide inflation indexing you should yourself increase it on a yearly basis for whatever amount that suits your pocket.

  • Policy expiry
Know you policy expiry date and check for grace periods. Many renewable plans provide a grace period of 31 days after the expiry date.

  • Change of plan provision
Some policies provide the option to convert to a high premium policy during the span of your plan. Check for it when you are buying life insurance.

  • Policy claiming and renewing
There should be no doubt about how to claim your policy. You must know the contact details and the necessary guidelines of the claiming process. Moreover, be sure about the grounds on which a company can refuse your claim and about the details of renewing a policy.

  • Policy surrender
Try to avoid surrendering your life insurance, as it will only lead to a loss. The cash value of your insurance policy secures your future, so think twice before you surrender it.
  • Policy review
Analyze your policy status with your agent at least on a yearly basis or when you renew it. Get the necessary updates and provide your latest health and financial details in return. Review your net worth regularly and reassess the situation your family may be in after you die.

All this done, just look ahead and buy your life insurance policy now. Go on-line and there is a variety of easy options waiting for you.
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