Deciding on the amount of life cover requires careful consideration of all the value that one might bring to one’s family and dependents in the foreseeable future.
The insurance sector in India was opened for private players in 2000, a little over two decades back. Since then, insurance awareness among buyers has seen a marked change. From different insurance products to the way insurance is being bought, the industry has evolved a lot. To make insurance serve its purpose, there are a few key things to keep note of. Let us look at some of them and make insurance buying a better-informed decision. On the occasion of Insurance awareness day Peuli Das, Chief and appointed actuary, IndiaFirst Life shares some key factors with FE Online that one may consider for being better aware of life insurance as a financial product.
On the purpose of life insurance
It’s with so much love and care that you build your own happy corner – a home, a family, a world surrounded by near and dear ones. Why life insurance? Because your loved ones would always need your assuring embrace, even when you are not there. They’ll need a chance to rebuild their lives while not worrying about the pending bills, a breathing space that doesn’t force them to make critical decisions at a time when they might feel most insecure and vulnerable. Some may call it an investment, but at its core, it’s about caring for those who you care about the most.
On the amount of life cover that one should keep
Deciding on the amount of life cover requires careful consideration of all the value that one might bring to one’s family and dependents in the foreseeable future. It must go beyond the immediate expenses – rents, groceries, clothes, or even a new car. Your kid’s tuition expenses are bound to grow. Your aging parents would very likely need protection against failing health, increasing cost of medicines, and domestic help. A mortgage would need paying off. Typically, a minimum of ten times one’s annual income is what is recommended. Insurers offer Human Life value calculators that provide reasonable estimates while considering all such factors.
On various types of life insurance policies that one may consider
The insurance market today provides ample options to the Indian consumer. There are of course the pure protection plans – cheap, with guaranteed long-term coverage. There are savings-cum-insurance plans that provide customers with an investment solution, yielding guaranteed steady returns for the family, over and above the death benefit. Then there are market-linked plans for the less risk-averse customers looking for wealth creation along with death coverage.
On the right time to buy life insurance
Life insurance is best bought early. The lower one’s age at the time of entry, the lower would be the premium for the same coverage. Moreover, it would allow your funds to build with time and support you better when you need it. The premium rates are more attractive for women, on account of higher life expectancy. Tax exemptions on premium make life insurance an attractive financial planning tool. Other tax benefits also exist, depending on the type of policy. Now is the right time to call your agent or study the information brochure before picking the policy you need.