First, we have to understand what is a life insurance and why is it important for an individual to have one. Life insurance is a contract between an individual and an insurance company. The individual pays the premium regularly and in exchange, on the death of the insured, the beneficiary is provided a lump sum amount by the insurance company. Insurance is a way of supporting the family or the dependent even after death. It is an effort to protect your loved ones in your absence. If there is any kind of debt, left behind by the insured after his death, it can be taken care of by the insurance money received by the beneficiary.
How to Choose a Best Life Insurance Policy
While buying an insurance policy few things must be kept in mind. How much coverage is required must be calculated. One can choose the various online calculators for this purpose. Though it is very difficult to assess the future expenditure, but one has to take into account the major expenses such as tuition fees and medical expenses. Group life insurances are offered in various companies. They offer the insurances at minimum or zero cost to the employees. One can opt for an insurance coverage of 5 to 10 times of their annual income.
Insurance may be term life insurance or permanent life insurance. Term life insurance expires after a certain period of time while permanent life insurance lasts till death of the insured. It is recommended to start with term life insurance. It is affordable and less complicated and the premium is same over the duration of the contract. Permanent insurance as the name suggests won’t expire, but are expensive. Another form is return-on-premium policies which gives back the money after the contract period is over.
Next important aspects which are to be considered are rates, the returns of the policies and ratings. For term life policies, rates are more competitive. Annual payments are better than monthly ones to avoid unnecessary charges. Whole life policies have comparatively higher fees and administrative costs and this result in lowering the return. Insurance company rating must be checked before applying for the insurance. Lowest premium is not enough. Apart from the premium rates, company rating is also important.
It’s better not to wait when we know that we have to secure the future of our loved ones in our absence. The more we defer the buying more will be the premium rates. With age the premium rates of the policy also increases. It is better to buy the policy at an earlier stage of life and lock a lower rate. Getting through the medical exam is also less fussy. Spouses should never be overlooked.
Lapsing of policies must be avoided. Automatic payments of premium can be done by automatic monthly bank draft. Even if one misses a single premium it can cause lapsing of policies. Insurance agents will not be reminding us for the payment. Once a policy lapses there is no chance of reviving it. So we have to be very meticulous about the premium payments.