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It's a common notion that not everyone needs life insurance; however, if your parents, kids and/or partner are dependent upon your income, you should definitely think about buying a life insurance policy.
There have been instances where the bread winner of the family meets with an accident and loses his life which leading to adverse consequences. The family of the accident victim has to bear financial strain because the deceased didn't think it necessary to invest in a life insurance policy that could have made his family financially secure.
The impact of losing a family member is enormous, both in terms of emotional pain and the sense of financial insecurity. Especially, in the case of developing countries like India where there is no strong support system to aid road accidents’ victims, we need to be prepared so that our family members don’t have to compromise with their lifestyle and other necessities.
According to a report released by the Ministry of Road Transport and Highways, here is the list of 10 risky cities in India with the highest number of road accidents and fatalities:
According to this list, Chennai has been declared as the most dangerous city in India when it comes to road accidents, followed by Delhi and Bengaluru in the 2nd and 3rd position, respectively. It might surprise you to find comparatively smaller cities like Indore, Jabalpur and Bhopal on the list, which might give you sense of how misguided our sense of security is.
Hence, if you don’t want your family to suffer for your lack of foresight, opting for a term insurance plan can be the best decision s/he makes. This is because, investing in a term insurance plan will not only be an affordable choice, but will also prepare a financial shield to protect your family if you aren’t around to take care of them anymore.
The policyholder purchases an insurance policy and pays the premiums on a monthly, quarterly, or an annual basis and if something untoward happens to him, the insurer guarantees to pay his family or his nominee appointed by him while buying the policy.
The insurance company might pay the sum assured to the deceased’s family a lump sum at once or in instalments, depending upon the type of life insurance plan the insured has chosen.
There are two major types of life insurance plans:
This type of plan covers the policyholder for a set amount of time.
For instance, if the insured has opted for a 20-year plan and unfortunately dies in the middle of the policy term, his beneficiaries will get the sum assured as discussed and agreed upon at the time of purchasing the plan.
And, in case the insurer survives the policy term, the policy will expire and he will have to buy a new policy if he is still eligible to buy one (considering his age).
These policies are slightly more expensive as compared to term insurance plans. This is because they never expire; hence, are also known as permanent life insurance plans. In fact, many life insurance policies offer 100 years of coverage.
Whole life insurance plans come with an element of investment which means that, if the insured so chooses, some of the insurer’s money can be invested in the stock market or can be taken as a loan, which means that the life assured can access his/her money even when he is still alive.
There is no certain rule which you can blindly follow to know how much money your loved ones are going to need to maintain their standard of living in your absence.
However, you can always use online Life Insurance Calculators to get an estimate of the amount you will need as the sum assured once you retire or what your family is going to need in order to continue their comfortable lifestyle, in your absence. Some of the factors that help to decide the coverage amount include the proposer’s age, gender, his smoking and drinking habits, current health status, etc.
Currently, there are over 25 insurance companies working in India, selling more than 200 products and plans in the Indian insurance market. However, as policies are a complex contract, it’s not easy to understand all the basics of a life insurance policy without any guidance.
To get a better understanding of these plans, one can either contact an insurance agent or visit a policy aggregator website such as Policybazaar to find the best life insurance policy.
The best part about using policy aggregator websites is that through them an individual is able to find reliable information and compare several life insurance plans at the same point of time. It ultimately helps them make an informed decision.
It’s understandable that people don’t like investing in life insurance because it makes them think about their inevitable deaths. However, buying a life insurance plan gives their families a second chance to survive financially, and chances are that in a long run you will find it that it was the wisest financial decisions you ever made.