Life is unpredictable. So, even when doing very well in life, you are never sure what the future holds for you or your beloved family. Perhaps nothing provides more peace of mind than securing your family’s financial future for the day “when you are not there.” The question is: How?
It takes more than just saving
- You will have a hard time securing your family’s future just by saving and cutting expenses.
- A life insurance policy can fulfill your family’s immediate cash flow requirements.
- Your family can face no, or minimum, disruption financially if something happens to you.
- You need a well-thought-out insurance plan and must pay attention to various aspects of a policy.
- Remember: Insurance is a long-term investment, and it’s difficult to make changes in a policy’s terms later.
- Your insurance needs depend on whether you are single, married with children, married without children, a single parent, an empty nester or a retiree.
- The first thing you need to figure out is who and what needs to be covered under your life insurance policy -- mortgage, utilities, healthcare, education of any children, etc.
- Ideally, your family, home and the status of your career should be reflected in your insurance policy.
- There are two types of life insurance policies: term insurance and cash value insurance.
- It has no investment component.
- It provides coverage for a specific period at fixed premiums.
- Compared with cash-value insurance, term insurance has lower premiums
- You need to decide the amount and period of coverage – 10, 15, 25 or 30 years.
- In the event of the insured’s death, beneficiaries get the face value of the policy tax free.
- It covers the lifetime of the insured.
- Permanent life insurance is of many types: whole life, universal life and variable life.
- Such policies have a cash value – you are paid back a portion of your premium.
- Tax is not charged on such policies until you withdraw the cash value or surrender your policy before your death.
- Keep your financial limits in mind.
- Go for a policy whose initial, as well as future, premiums are within your range.
- It’s imperative to carefully review the terms, coverage premiums, benefits, renewals and termination clauses of the policy before buying it.
- Understand the time period for providing the insurance benefits to beneficiaries in case of untimely death.
- Your beneficiaries should also have information about your insurance policy and its terms and conditions.
- Weigh the pros and cons before dropping your current policy in favor of a new one.
- Insurance companies charge to drop or replace your current policy with a new one.
- Even if your health status changes, most term insurance policies can be renewed for a term or more.
- The premiums for renewed term policies are higher.
- Ask about the amount of premiums to be paid if renewal is sought after a certain age.
- Ask for the age up to which you can renew your term insurance policy.
- You can upgrade your existing policy if your requirements change.
- Take inflation, current economic status, changing family size and future plans into count while reviewing your insurance policy.
- Hiding personal health information or filing wrong information to get lower premiums can later lead to the loss of coverage and benefits.
- Insurance companies can deny full benefits to beneficiaries if you die of an illness you had before signing the policy and did not reveal.
- Life insurance should be 10 to 12 times of your salary, but your employer may not offer that amount.
- You’ll lose your coverage if you change your job or your health declines.
- Employer-provided life insurance tends to get more expensive as you age.
