FINANCE TIP OF THE DAY
Can you afford your loan?!
Know the quantity of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offer. As a thumb rule, remember not to let your credit exceed 40% of your income!
Life insurance – An Overview
Life insurance is a commercial contract between the insurance policy proposer and the insurance service provider. However, apart from customized plan of insurance policy and its coverage, there are wide ranges of insurance policies available in market under different flagship brands. Although the aim of all insurance policies are almost the same, which is providing best quality life coverage and return value of investments in the form of premium, it is extremely essential to learn the basic details about the life insurance plans and the coverage provided by these plans.
Depending on the major aim behind taking these policies, there are two basic variants:
- Protection policies - are mostly known as term insurance, the benefit of these insurance policies involve a lump sum amount against the death of the proposers.
- Investment policies – where the chief objective of the insurance policies is to assist the increase of capital by recurring/regular or single premium; whole life, variable life, and universal life policies are included in investment life insurance policies range.
The Inherent Policy of Life Insurance
Life insurance policy is meant for life coverage. Although in all sense human life is priceless, but when a bread earner of a family passes away all on a sudden it simply creates a catastrophe that is hard to withstand for rest of the family members. The coverage of life insurance cannot bring back the life but can protect the family with financial security and ensures safety of them. Hence availing life insurance policy is no doubt an extra protection for an individual and for his/her family in dire distress and in case of life penalty even.
Why to Buy Life Insurance Scheme
Security and safety are the two primary aims behind availing life insurance schemes. In some cases it is the initiative to protect kids and family in case there is any death or dire accident causing disability, etc. Insurance policy can help in two extreme conditions where an individual lives too long or dies too early. To prevent this kind of distress, life insurance policies are taken for ensuring extra protection.
- A life insurance policy provides excellent financial support for a family where the bread earner or a significant earning member has suffered from death penalty
- An apt children’s policy can finance child education and other financial needs of the family
- Availing a life insurance savings plan helps in creating a consistent flow of income in post retirement period.
- Creating extra income for improving life style
- Managing finance portfolio better
- Availing increased income tax deduction out of availing insurance policy
Life Insurance Cover: How much is Required
The actual level of cover that can be considered adequate is a highly fluid and dynamic figure as it changes from time to time and is also different for different individuals depending on their personal situations. However, the factors, which are to be taken in consideration, are,
- The number of dependants
- The number of liability and responsibility of mortgage
- The standard of living a family is leading
- The plan for children education
- General health of the family members
- Detail analysis of the affordability
- Detail analysis of the standing asset and asst liabilities
- Forecast rates of inflation
- Forecast cost of living to maintain the current standards.
Types of Life Insurance Available
Currently the public and private players in the life insurance industry of India are offering a array of life insurance products with a host of benefits for the policy buyers. Some of the basic types of policies available in the Markey are listed below.
- Pure Term Insurance Policy: is a basic risk cover policy which protects the life insured for a pre-determined period of time as stated in the contract.
- Whole Life Policy: is a basic risk policy that provides cover throughout the life of the insured irrespective of any time fame.
- Endowment Policy: Is a policy that combines insurance cover along with savings for the insured.
- Money Back Policy: is a policy in which periodic payments of certain sum assured are made to the policy holder. In case the policy holder survives the term then the balance of the sum assured is paid to the insured.
- ULIP: is a market linked policy that provides basic life cover along with a host of investment options for creating better returns.
- Annuities and Pension: are policies that provide the insurer with stipulated sums periodically to protect against financial risks and give pension at regular intervals.
Life insurance is an essential ingredient to any kind of personal financial planning as it caters to the basic issue of security for the dear ones. Seeking professional help while deciding on the type and amount of life insurance is a smart way for beginners as it will help them appreciate the various nuances of plans and policies available in the market currently. A little research on the internet will also provide detailed comparative studies from all desired angles regarding the various policies along with the associated benefits and pitfalls.