Essentials of Life Insurance

Life Insurance supports & holds your entire family during the doleful & unhappy moments of life when there is an urgent need of finance in one’s family, making your life simpler & tension free with protection against the risks of life. Life insurance provides you not only with coverage against life but also other options of investment & savings for your future needs; therefore choose your life insurance plan after carefully understanding the various plans with their features fitting your requirements.

Plans
There are various Life Insurance plans wherein you can have a live insurance cover along with the investment options according to your risk appetite.
• Firstly there are Term plans giving pure life coverage where the premium is low providing a risk cover only for a prescribed period; savings and reserves are not accumulated under this policy & it has no surrender value.
• Second is the Endowment Policy where you will get the returns at the end of the policy term and the insurance cover will come to an end.
• Then comes the Whole Life plans running for the whole life of the assured & the sum assured becomes payable to the legal heir only after the death of the assured. Returns are received both during and at the end of the policy, but like endowment, the cover will end on completion of the policy term.
• Then in the end comes the ULIP plans where you can choose any fund type -- equity, debt or mixed, unlike in traditional policies & your money is invested in equity markets.

How much Insurance coverage is required?
Now days the thumb rule says that your insurance cover has to be 5-7times your annual income but this rule doesn’t ensure that you have got the right cover. To calculate the insurance coverage, you need to know your current assets, annual expenses of your family including your children’s education expenses, annual income of your spouse etc. The sum assured will be calculated by taking into account all these points.
Calculate your Insurance coverage

Which Plan to go for?
Choose the policy after carefully analyzing your needs. If you purely need risk cover taking care of risk to your life with no savings & returns, you should go for Term Plans, which are available for a limited period for instance 10 or 20 years. If anything happens to you, your nominee would receive the sum assured and if you outlive the term you receive nothing, so you must take a Term Insurance plan if you want only the life cover & not returns
You can choose an Endowment plan or a Money back plan when you want some savings & returns in the form of Bonus for your family like savings for your child’s education wherein you receive returns at certain milestones of your life like for your child’s marriage or purchasing any asset etc. Those who have lesser risk appetite can invest their money in Endowment plans where the money is invested in government bonds & securities.
Next comes the plans where your money is invested in equity markets called Unit linked insurance plans having the opportunity of investing 100% in equity and you get the option of switching your investment from equity to debt. The ULIPS offer good return in the long run so proves to be a good source of investing your money which have a lock in period of 3 years i.e. the money remain invested for 3 years and after that you can withdraw your money.

Benefits
• Life Insurance cover: Firstly life insurance provides you coverage against the risk of your life & supports your family’s future requirements.
• Tax Benefits: You can save tax upto Rs. 1 lakh on Premiums paid for Life Insurance Plans under Section 80C.
• Savings & Investments vehicle: You can also invest your money & save for your future like for your children’s education & their marriage, you can also invest your money by saving for your retirement.

In short your life insurance portfolio should be made after carefully analyzing your needs wherein you can combine different sets of plans or schemes in your portfolio
• Firstly you can take a Term plan which is the cheapest among all the plans covering your life insurance purely
• Secondly on account of risk you can bear & the amount of money you can invest, accordingly invest your money in Endowment plans (Investments in govt bonds & securities involving lesser risk) or you can either invest in market linked insurance plans involving more risk (Good returns in the long run).
• You can make a combination of these two plans wherein the former includes the lowest premium having only a life cover & the latter involves planning your investments according to your budget but you need to take care of this fact that the ULIPS may not give good returns in the short run.

In the nutshell Life insurance is the most important ingredient in your life firstly to cover the risks of life & secondly savings for your family’s requirements. Therefore apply for life insurance instantly & live a peaceful life.

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