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Is life insurance a good investment?

If your family members totally rely on you to cover other living costs, then it would be worthwhile considering taking out a life insurance policy. The following factors will help you determine whether or not you need to take out a life insurance policy:

·      If your family members rely on your income
·      Living in a house on rent
·      To accomplish short-term financial goals like higher level education for your children, retirement savings etc.
You might also need a policy to cover your funeral costs. You just can’t depend on the government to look after your family members, as the money provided by the state is much lower than you expect.
So, if you want to help your family financially in the case of your demise, think about investing in a life insurance policy.

Choosing the correct insurance is important, as otherwise it can lead to severe losses. PPI is the biggest example of a mass purchase of worthless insurance cover that led to billions in compensation and even today many customers are eligible for a PPI reclaim.
Basically, there are two types of policies:
Term life insurance policies: This policy runs for a fixed time period of 5, 10 or 25 years.
But remember there are some pros and cons of purchasing this type of life insurance:
·      Premiums are not as costly as whole life insurance policies.
·      There is no demise advantage once your term of coverage has passed.
·      It doesn’t include a feature for savings.
·      At times you can change a policy to a long-term policy.
Whole-of-life policy:  This type of policy will pay out regardless of when you die, as long as you stay aware of your premium instalments.
Pros and cons of this type of life insurance policy include:
·      Premiums are quite expensive.
·      Value of the policy increases with time.
·      Coverage is for your complete lifetime.
·      A penalty will be charged if you cancel a policy.
It doesn’t matter what kind of policy you buy, but it’s important that you purchase a policy. Apart from being a sound investment, it can also be considered as a safety net that will provide for your loved ones in the event of your demise.
Would your spouse be able to pay the rent? What about other education loans or car payments? If you think about it you will find that your beneficiaries will have to deal with a lot of financial obligation on your behalf.
Leaving your family with a heap of bills that they will struggle to pay off is a mortifying thought in itself.  A life insurance policy will give your family enough money to deal with such situations without having to going through a lot of financial strain.
Reasons to invest in life insurance
Below given are some benefits that you can avail by investing in a life insurance policy:
·      It provides security and assurance
The biggest advantage of investing in life insurance is the security that it offers to your family and loved ones. If a person dies within the time period of the policy purchased, then the Life Insurance Company is subject to pay the ensured life cover to the chosen beneficiaries.
·      Return on investment
The scheme of life insurance yields better than many other investment options. Majority of the schemes of life insurance provide bonuses that no other scheme offers. The money that you have invested in life insurance is secure and covers all the risks.
Additionally, the money that you have invested in life insurance will bring great returns once the term duration of the policy expires.
·      Opt for a bank loan
Yes, you can opt for a loan against your life insurance policy. Whole Life plans are intended to cover the life guaranteed over the lifetime of the policy. Therefore, it is possible to take out a loan on the withdrawal measure of your Whole Life plan. It is also possible to select a loan against the Surrender Value. The Surrender Value increases after some time and it’s a superior choice than selling your home against the loan. Other advantages include:
     You remain secured for the duration of your life.
     You get returns on your savings.
     You can opt for a loan to fulfil your present demands.
·         Mental Peace
Death is the most unforeseen tragedy of all and it is impossible to predict it. But, with life insurance, you will have some peace of mind because you have sufficient financial security and other options for your family and your loved ones in case of your demise.
Also, the small policies will offer huge benefits during hard times. Life insurance policy is considered as a great source of financial security for your family members.
·      Begin as early as possible
The earlier you start investing in life insurance, the better deals you can avail. By getting older, you will lose out on many schemes, as you will not fulfil the eligibility criteria for it.
Therefore, it’s important to invest in life insurance as early as possible.
·      Long-term plans and dreams
By making use of money from your policy of life insurance you can fulfil all your hopes, dreams and future dreams for your retirement life. You can start your own business after retirement or you can purchase a house from your life insurance returns.

Mistakes one should avoid while buying a life insurance

Below given are some mistakes one should avoid while purchasing a life insurance policy:
·      Not knowing the premium paying term
You need to pay some amount of premium for any insurance plan that you buy. Every plan has different premium amounts attached to it. Knowing the premium paying terms for your policy will help you find out the exact amount that you will have to pay for your chosen policy.
·      Buying too many policies
This is one of the common mistakes made by many people. Every policy has a cost involved with it. You must always look for an insurance policy that has the flexibility to match your needs and future requirements.
·      Focusing on price and not on coverage
Avoid buying a cheaper policy just because it has low premium rates. Paying low premium rates is good but if it’s not providing you enough benefits then it’s useless.
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