The most experienced of investors have a difficult time finding their way out of the maze of financial investments or policies. Yet that should not be a deterrent for one to dive deep in the world of finances as the sole guarantee for the future of any individual and their family in rough times is a rock solid Insurance Policy that takes care of an and every eventuality.
A lot of questions run amok while deciding on the type of policy to trust and following are such 5 Questions which must be answered in detail before placing your bet on an Insurance Policy.
Q1. Does one need extra protection if their existing financial plan focuses on building a huge corpus through savings.
Ans: A huge corpus is a great goal to aim for. But it does not fall under the purview of either savings or protection- both of which are necessary for long term financial security. What helps in this case is to buy sufficient financial protection. This way long term financial goals- like building a corpus stays protected irrespective of whether one is around or not. A protection plan helps to achieve the pre-determined financial goal is achieved.
Q2. When a Policy Tenure ends, - what are the returns that could be expected?
Ans: The answer to this varies upon the life insurance product one is insuring. Term Insurance plans and endowment plans will reap different benefits. Term insurance plans make sure that the dependants are paid a lump sum amount of money in case of demise of the policy holder during the tenure of the policy. Whereas endowment plans require higher premium and the end result is that one gets both death and maturity benefits
Q3. Term Insurance Plans And Endowment Plans – the difference, the benefits and the price?
Ans: The prices are plan dependant. One can buy a term insurance cover of Rs. 1 Crore with a premium that ranges between Rs.6000 and Rs.8000, annually. Endowment plans tend to be more expensive. A Rs 1 Crore endowment cover can be bought for an annual premium of Rs 1,00,000 for policy term of 30 years. The difference lies in the fact that the sum assured in endowment plans is paid only upon maturity but in term plans, no maturity benefit is paid out.
Q4. How much insurance is ‘good enough ‘?
Ans ; There is no’ one size fits all’ answer to this q.
What is important is to make sure the coverage amount settles all dues as also generates a decent enough income for one’s family to support themselves & to start anew.
A simple formula to calculate life insurance cover would be thus -
[% of monthly income (you wish to cover) – monthly savings X 12 X number of years (your dependants will need financial assistance )]
Q5. Changes in the life cover?
Ans : It is really important to keep vigil over one’s life cover, to keep revisiting when there be fluctuations in expenses, income and responsibilities. A rule of thumb is to have an insurance cover 20-30 times the yearly income for a 40 year old individual. And for someone above 50 years of age, a cover about 5-10 times the yearly income is the needful.
Life Insurance Policies remains an absolute necessity for every Indian household irrespective of socio-economic differences. Knowing the answers to these essential questions helps you veer better in your quest for the perfect policy.
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