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.
