Life insurance protects your loved ones from financial insecurity should you, the bread earner, meet a critical eventuality. Life insurance can be a form of investment in the long run, securing your home loan or retirement savings.
The situations you protect yourself from will add to the premium you pay for insurance each year. Your life insurance premium is determined by:
- Age: The younger you are, the lower the premium, since there is lesser risk of your being affected by critical illness early on.
- Term of the Policy: Longer term policies are cheaper.
- Medical History: Your family medical history as well as your own determines risk and therefore the premium. The availability of complete medical records can significantly lower your premium.
- Addictive and Harmful Habits: Smokers and drinkers have greater chances of acquiring serious ailments and hence risk for them is higher.
- Profession and Lifestyle Preferences: Your line of work determines what kind of risks you face in life. Your attitudes and behaviour are also taken into account in determining whether you are a natural risk taker or not.
- Current Health Status: If you are obese or have a chronic ailment, such as diabetes or arthritis, you pose a greater risk of mortality before the term of the policy.
A number of choices for life insurance have been developed by providers over the years. You can select one based on your disposable income, your annual expenses, the property you own and the debts you owe. Generally, about 9-10 times of your annual income is the appropriate Sum Assured you must look for in your insurance.
This is the most basic form of protection, which assures your dependents an agreed sum in case of your untimely demise. Premium payments stay fixed through the life of the term insurance and can be extended to cover 35 years. Term insurance, when combined with riders, such as Childbirth Waiver of Premium and others, offer added benefits.
Endowment policies are relatively short term instruments, allowing you to reap their benefits while you are alive. When combined with an annuity, endowment policies can serve as a significant addition to your pension after you retire.
Money Back Plans
Money back plans allow you to receive a percentage of the Sum Assured during the term of the policy and hence serve as a savings plan. Money back plans are also generally eligible for tax deductions.
Unit Linked Investment Plans
Unit Linked Investment Plans (ULIPs) offer the combined benefits of insurance and returns on investment from listed equities, debt funds and bonds. Part of the paid amount is invested for each of these purposes.
Investing in your family is as important as loving them. So, start searching for insurance policies online now or meet up with your friendly financial agent as soon as possible.