Life insurance is essential for everyone, regardless of their age and financial standing. Life insurance is an inexpensive way to keep the financial prospects of your family well-protected and secure. You can get life insurance in many forms, so you should be careful when selecting the correct type of coverage. In this article, we discuss the importance of understanding the core concepts of life insurance and then choosing the most appropriate plan. Read on to know more.
Why is it important to choose the right life insurance plan?
Let us understand this with an example. Rahul, a 32-year-old father of twins, invested in a term life insurance plan for 20 years. At the time of buying the plan, his kids were 5 years old. The coverage amount was INR 1 crore and Rahul felt it was sufficient. Sadly, though, after seven years, Rahul died due to a kidney ailment and his wife was left with the responsibility of the kids, the home loan and the cost of living of the entire family. As the beneficiary, she received the sum assured from the term plan, but a majority of it was used to repay the home loan. She was hardly left with any money to run the household, and everything was over by the time her kids finished their school. Unfortunately, the kids couldn’t apply to their dream universities abroad and the family suffered emotionally and financially.
How to choose the right life insurance plan?
If Rahul had been more mindful in choosing the correct life insurance coverage, his family would not have faced such a fate after his demise. To ensure your family is never in a similar situation, you need to understand the features of life insurance to get the correct policy. Also, you need to keep the following factors in mind:
- Coverage amount
First and foremost, you need to assess your requirements and see how much money your family will need after you are gone. The coverage amount should be appropriate and sufficient and support them for as long as they need it. Your family should be able to maintain the same lifestyle and not have to cut down on any expense due to financial constraints.
- Liabilities
To know the proper coverage amount to choose for your life insurance plan, you need to see how many financial liabilities and responsibilities you have. Do you have a home loan or a personal loan that you are still repaying? Do you have elderly parents with health problems? Do you have small children? The coverage amount you choose must cover all your financial liabilities and responsibilities, so make the calculation very carefully.
- Number of dependent family members
The coverage amount and the type of life insurance you choose will greatly depend on the number of dependents you have and their financial needs. If you have small children, opting for a child plan or money-back plan can help. If it’s just you and your partner, a good term life insurance cover would suffice. Hence, choose life insurance after understanding the dynamics of your family.
- Financial goals
Life insurance is bought to cover your financial goals. If you aim to secure your child’s future, opting for a child insurance plan would be a good idea. If you aim to cover your home loan, a term plan would be good. If you wish to be financially sound after your retirement, an annuity plan would work. Hence, keep your financial goals in mind when you choose the right life insurance plan.
- Budget
You should get proper life insurance with proper coverage, but you have to have an affordable policy. If the premium is too high, you may struggle to pay it and that may lead to a loss of coverage as well. So, look for the best plans at the best rates and make a wise selection.
- The insurer’s reputation
And finally, remember to get life insurance from a good insurance provider who has a high claim settlement ratio, an excellent customer support system and enjoys a healthy reputation in the industry. This will help your family when they need to make a claim.
To wrap it up
As you can see, getting the correct type of life insurance plan, along with the correct coverage amount, is of utmost importance when choosing life insurance. Keep all the points mentioned above in mind and you will be able to get the best coverage at the best price with which you can keep yourself protected and your loved ones financially secure.