Basic Guide to Life Insurance: A Step by Step Guide

Basic Guide to Life Insurance: A Step by Step Guide

In the blink of an eye, everything can change and that’s exactly why we need a life insurance. Besides our own lives, life insurance enables us to secure good health and well being of our family.

According to age, health requirements and long-term benefits, we must make a judicious choice in selecting the best life insurance. However, before opting for one, we must possess some basic information on life insurances. Here’s a detailed guide to it.

Dos And Don’ts Of Life Insurance

Before we put our autograph on the life insurance document, we must:

Shop around and compare rates as the cost of same coverage will vary across companies.

Review our coverage plan periodically. We may get married or divorced. Our children may come into the planet. We may also lose a family member. All such changes will necessitate some kind of adjustments in the plan.

Tell the truth to the insurance agents as most companies do a follow-up before issuing the insurance.

Look for multiple insurance options and ask for suitable alternatives to our agents.

And we must not:

Rely solely on the words of the insurance agent or organization. Well, they too earn their living and therefore will do everything to squeeze maximum money from our pockets.

Never consider the life insurance as our retirement plan. Our investments and insurance policies should be different, unless unforeseen circumstances compel us to mix the two.

Sign on any contract or document without reading it thoroughly. Proper time and effort should be given for reading the entire document word by word. Once we are convinced only then we must go for it.

Overlook terms like Riders, Free-Look Period, Grace Period, Surrender Value, etc. Notwithstanding the definitions and explanations of the terms in the document, we should make extra effort in going online and learning about them.

Different Types Of Life Insurance

Pure Term Life Insurance

This kind of insurance works best if the policy holder expires within the contract period. For example, if the policy is for 30 years and it’s done by the holder at 30 years age, it means that it will last until he is 60 years.

Every year the person has to give a premium. If the person dies in between this time, the family will receive the insured sum. And if the person lives the entire contract period, he shall receive the sum assured money after the period of contract ends. This means that the contract expires with the coverage period.

Convertible Term Life Insurance

It works like a hybrid model where the policy holder can change the entire contract to a permanent life insurance. And all these can happen without undergoing a medical test or a written application.

This is why convertible life insurances are costlier. Also, those above 65 years cannot opt for it and it is also backed by a shorter coverage period. For better illustration, we can always visit this website which covers all aspects of life insurance in a comprehensive manner.

Permanent Life Insurance

Unlike pure term life insurance, this does not expire. Instead, it continues until the policyholder dies. However, the holder has to continue paying the yearly premiums even after the expiry of the policy period. The entire sum assured money can be received after death.

Factors To Consider While Choosing A Life Insurance

1. Beneficiaries of the Policy

The first thing which all the insurance companies ask is the number of members in our family or at least the beneficiaries of the insurance policy. The beneficiaries may be our parents or spouse or only children or at best everyone. Whatever it might be, we must declare the beneficiaries, based on which the organisation shall fix the insured amount and the premiums.

2. Reasons for taking up a Policy

Do we have a life risk? Does our child or spouse go for regular treatment? Or Do we need to insure our family after our death? These are important questions whose answers will determine the prime reason behind taking a life insurance policy.

3. Premiums & Benefits

For a particular coverage period, different companies will offer different premium rates and benefits. As a rational buyer, we must compare them and select the most cost-efficient policy according to the benefits.

So this was all the primary information about life insurance. Undoubtedly life is the most precious thing on earth and we must take every possible step to protect it. And while we do so, we must be careful in making the right choice. After all, it’s not just us but our entire family whose future depends on our wise decision.