All you need to know about insurance policy

When you buy an insurance policy, the company promises to pay out an amount equivalent to the life risk cover you have taken in the event of policyholder’s unfortunate death. The company is liable to pay the amount to your nominee. In return for this promise, you are required to pay a fixed premium to the company during the entire policy term or till a specific term period.

These days leading insurance firms offer customized policies to clients that will meet their specific requirements. Within life insurance, there are varied plans tailored to meet life goals. Whether you plan for your child’s higher studies, retirement, wealth creation, saving goals, meet lifestyle needs, there is always an insurance policy being tailored to meet your goals. Thus, insurance plays a big role in financial planning as it ensures the future financial goals of the family are met with ease if the sole breadwinner of the family is not around due to his or her sudden demise.

To meet the various financial goals one has to save on regular terms. Insurance policy inculcates savings habits as one has to pay the premiums till the policy term will end. You pay in monthly, quarterly, half-yearly or annual basis. So, a habit is developed. It makes you disciplined as far as savings is concerned. You can even link the premium payments at the time of monthly credit of your salary.

The premium that you pay dependents on how much risk cover you can afford to take. But then again it is based on your income source and risk appetite. Although, when it comes to family security no amount is sufficient, however, you have to come to a certain consensus based on your annual income, your financial planning objective and considering all your assets/liabilities.

While deciding your risk cover, you should take into account the annual expenses, your home, personal or car loan, future children goals like education, marriage, lifestyle needs, retirement corpus for your spouse and lastly the inflation costs.

Some experts suggest life cover should be good enough, when invested in a safe instrument should fetch a regular income for the dependents of the policyholder. Which means one should add the liabilities, if any, to the amount of insurance required.

These days online insurance policy can be compared and purchase at your own convenience. You can compare policies on aggregator sites in terms of premium costs, claim settlement, company reputation, customer reviews, solvency ratio, etc. Once you compare you can fill up the relevant form and hit the BUY button. Within a couple of minutes, the policy documents will the emailed to you.

Most companies have developed an app for your smartphone devices. You can compare policies, make premium payments, renew policies as well as make claims while on the move.

An insurance policy should be the quintessential part of your investments as well as savings portfolio. It should be purchased based on your needs and not follow the current trends or friends. You should plan your insurance needs based on your short and long term goals along with the impact of inflation.

An personal loan would be the first financial help for your family in your absence.