A SIMPLE WAY TO UNDERSTAND LIFE INSURANCE

We all have often heard about Life Insurance from financial advisors and insurance agents. While most of us must have felt the need for life insurance at some point of time; purchasing it may seem to be a complicated matter for many people, mainly because of lack of clarity about the concept and its features. Some of the most common questions about life insurance have been answered below. I hope that it will help you in understanding the concept more clearly and may assist you in taking a wise decision in this direction.\n\nWhat does ‘Life Insurance’ mean?\n\nLife insurance is a financial resource that the insurer promises to provide to the loved ones of the ‘life insured’ in case he dies.\n\nMeaning of Beneficiary:\n\nBeneficiary is the person to whom the financial benefit will be paid upon the death of the insured. You can choose your beneficiary and can change him as per your wish.\n\nWho needs life insurance? \n\nYour need to purchase insurance depends upon your personal and financial circumstances. If you have dependents such as your spouse, children, elderly parent/relative or, if you don’t have enough savings to cover your final expenses or inflation in economy; you should consider purchasing life insurance. Unmindful of your marital status (single/ married), life insurance is equally useful for everybody. It is vital both for the rich and the poor. While for the rich, it helps in estate creation after their death; for the poor, it acts as a valuable financial resource to cater to the needs of their family.\n\nWhich is the appropriate age to purchase life insurance? \n\nThe sooner you purchase, the better it is. You can purchase insurance for a new born baby up to the age of 80 years. Though you can chose to purchase insurance at comparatively higher premium rates at a later age if you have enough savings at that time, the best time to purchase insurance is when you are young since due to better health, you have to pay low premiums. It is especially good for young children because of their insurability.\n\nWhich choices are available? \n\nAs per your needs and financial capability, you can choose any plan out of different available options such as Term Life, Whole Life, Universal Life or Variable Life. While on one hand, Term Life plan offers protection with minimum expenses but limited features, Universal Life plan offers most comprehensive coverage and features by investing more payment in the premiums.\n\nHow much coverage should you buy?\n\nThough there is no specified amount, as a thumb rule, it’s usually recommended that you should purchase coverage up to 15–20 times your annual income. As a matter of fact, the amount also depends upon your circumstances/liabilities such a mortgage payment etc.\n\nAre medical exams a necessary part of purchasing insurance? \n\nWhile different carriers have different requirements for medical exam, most insurers have made provision for ‘no requirement’ of medical exam for coverage between $100,000 and $500,000. But, age does affect the requirement of basic blood and urine tests. Also, your health history and your insurer’s underwriting guidelines partly affect this requirement.\n\nHow can we reduce the cost of life insurance?\n\nYou can achieve this by: purchasing insurance when you are young, shopping around for comparative prices and coverage, opting for higher coverage amounts, adopting a healthy life style and, by paying premiums up-front.\n\nHow can the beneficiary/insured use the premium? \n\nThe beneficiary has the liberty to use the financial assistance for any purpose as per his needs/requirement such as mortgage on the home. Depending upon the insurance plan, the insured can also utilize the policy for any required purpose such as children’s college education.\n\nIs it possible to include one’s parents and children in the insurance policy?\n\nYou can certainly include your parents and children in the insurance policy. You can include them in the form of a rider or, can purchase stand alone policy for them.\n\nCan I replace my existing policy? \n\nIn the first place, it is never advisable to change your policy. You must always think ten times before taking such action since a two-year contestability period and twoyear suicide clause will be applicable to the new policy. But, even if you encounter any changes in life such as marriage/divorce, birth of child, change of health, home purchase, career promotion, Sandeep Ahuja caring for parents, inheritance etc., you may buy a new policy or adjust the benefits. However, before taking such action, again, it is vital to consult your insurance agent for best alternative/solution.\n\nMeaning of ’cash surrender value’ \n\nIt is the amount of money given back by the insurer if you want to surrender/give up your policy. I hope, the above mentioned points should have given you a fair idea about the concept and features of Life Insurance. As an independent insurance advisor working through Punjab Insurance Agency, I deal with different insurance companies offering plans for different types of insurance. I can explain to you in detail, the insurance plan options and coverage that are suitable for your needs and resources.\n\nThis article is © Copyrighted 2018-09-28 and can be reproduced only with prior permission.\n