Take care of few things before you invest in life insurance

Life insurance is the contract between the policy holder and the firm, in which the firm promises to pay a lump sum amount to the beneficiary, in exchange of fixed premium. It is an important financial tool for every individual who has dependents around them. Life is full of uncertainties, but certain responsibilities towards your family cannot be taken lightly. These insurance plans help you to build a financial corpus for your family, in case you have to bid adieu before time. With various policies available in the market, you have the liberty to choose the policy, which caters to your need.

There are basically five types of life insurance plans, they are:

• Term insurance: It is the simplest and most economical insurance cover for life, designed to provide a financial cushion to your family. It ensures that the beneficiary gets the decided lump sum amount in case the policy holder expires within the insured term. There is no maturity benefit, for the policy holders. It is a pure life insurance plan. The premium is quite low in comparison to the death benefit it provides. With various riders one can enhance the quality of the plan. In case the insured wants to get back the paid premiums, then he can take return of premium rider.
• Endowment plans: these plans are combination of insurance and investment. A portion of the premium goes for life cover and the rest goes for investment. The invested amount accumulates some bonus amount at the end of every year. This bonus amount is added on the sum assured. The policy holder either maturity benefit for himself/herself or death benefit for their beneficiary.
• Unit linked insurance plan: one portion gets invested in market and the residual amount is invested in the life cover. The policy holder can either invest in equity or debt funds, depending on their risk appetite.
• Money back life insurance: offers periodical payments of partial survival benefits during the tenure of the policy, as long as the policy holder is alive. In case the policy holder expires, the firm pays the full sum assured along with survival benefits to the beneficiary.
• Whole life insurance: This policy is valid for whole life or 100years, whichever is earlier. The insurance company provides the calculated bonus amount on the sum assured to the beneficiary along with death benefit in case the policy holder dies within the insurance term.

Child plans and pension plans are few other life insurance policies. You have wide array of plans, crafted to suit your financial needs in different phases of life. Before buying the policies you need to keep few things in mind, some of them are:

• Keep the future financial goals in the forefront, before choosing the cover amount. Some are: education, health & family lifestyle and existing debts.
• Choose the cover, whose premiums can easily be accommodated in your budget.
• The firm from whom you are buying the policy should have existing market goodwill, high claim settlement ratio and high solvency ratio.

The aforesaid points are important to help you buy a policy which can provide a financial cushion in true means. Life insurance policies are not just tax saving (under section 80C & 10(10D)) tool, but it is a budget necessity, so cut short unwanted expenses & invest in ideal insurance policies for life.

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