Insurance is an important element of individual personal finance. It is not just an instrument for investment but also a cover against untoward incidents, which may arise in the future.
It is important to know everything related to the insurance plan before availing of one. Some of the important pointers with regard to insurance are mentioned below:
1.Cover for dependents
Life insurance provides cover for not only yourself but also your family. You may cover your dependent family members, parents, wife, and children. It is also helpful when you are retired and looking for permanent inflow of income.
2. Inevitable consequences
Availing of a life insurance helps in case of unforeseen circumstances, which may arise in the future. It could be illness, loss of job, loss in business or others.
Most importantly, in case of your demise, such an insurance’s provides death benefits to your nominee. The inevitable conditions or loss of life not only impact dependents emotionally but also leave them helpless if there is not alternative income. A life cover acts as a safety net in such situations.
3. A contract
A life insurance policy is a contract between the insurer, which is the insurance company and the individual who has financial interest in securing life. Insurance companies pool in money by the medium of premiums and in case of any insurgencies pays the claims out of the accumulated funds.
It is also important to understand the kind of policy you are taking and the aspects covered under the policy.
4. Primary players
There are four primary players in an insurance policy. The insurer, owner, insured, and beneficiary.
- The insurer is a life insurance company that provides the policy. The insurer responsible for providing the claims.
- Owner of the policy is the person responsible for providing the premium.
- Insured is the person for whom the insurance policy is availed of.
- Beneficiary is the person, trust, or entity who would receive the claim
5. Risk management
May people consider a life insurance policy as an investment. However, it is a risk management medium protecting against the unexpected conditions that may arise in the future.
6. Types of insurance
There are two broad kinds of insurance. Permanent and term Insurance.
- A term insurance provides life cover for a specific period, such as 10, 20, or 30 years. It is based on the probability of death. If the policyholder passes away during the policy tenure, the nominee would get the death benefits.
- A permanent insurance not only includes the probability of death but also has a savings option. An example is whole life insurance where the nominee receives the policy benefits after the demise of the insured. Moreover, it entails the saving component, which helps the insured accumulate funds in the long run.
Although a life cover is essential, it can be expensive. However, it is important to take insurance cover to safeguard against insurgencies.
It is important to assess the right need for taking an insurance. There is a wide variety of life insurance plans available in the market. However, the right plan must be selected depending on your requirements.
9. Expert advice
To plan for retirement and investments, seek help from a financial planner or an expert. A financial planner may help you select the right insurance cover depending on your needs and future preferences.
10. Policy cancellation
Before cancelling any policy, understand the exit requirements. Check if it would be ideal to cancel the same at that point of time. Understand the pros and cons of both cancelling or continuing the policy.
The above are some of the important pointers associated with a life insurance. There are various insurance plans to choose from, however, the selection should be based on your needs.