INSURANCE What is life insurance? What is life insurance? Life Insurance – A Life Decision In legal terms, life insurance is a contract between a policyholder and insurer, where the insurer pays a specified sum to the insured’s family upon his/her death. The life insurance sum is paid in exchange for a specific amount of premium that has been paid in advance, over time. More practically, life insurance is designed to minimize the impact of the economic loss your family may face upon your demise. It provides replacement income and security for your loved ones after you are gone. For breadwinners, one of the biggest assets they provide their family is income, so continuation of this very income is important.
In short, life insurance Moreover, you can live assured that wealth preservation is already taken care of for the next generation. Life is beautiful, but also uncertain. The only certainty in life is death, and it pays well to insure it in advance.
Types of life insurance There are so many options available like Traditional, Universal, Investment Linked, Jumbo Life, but I prefer two main types of life insurance. 1. Term Life Insurance offers protection for short-term only, i.e., it is a temporary insurance for a period usually between 1 and 30 years. If you stop paying premiums, the insurance stops. These policies pay out if you die during the term of the policy. The premiums payable are more reasonable, and the policy does not build cash value over time.
2. Whole Life Insurance offer protection for your whole life. They intend to protect your loved ones permanently, as long as you continue to pay your premiums. There are many different payment options, such as paying yearly with a limited pay period of 10-20 years. Many of these policies accumulate cash values and dividends over time.
How much life insurance do you need? The answer to this question depends on your income and the protection your family needs. The goal is to develop an insurance plan that compensates for the loss of your economic contribution. It is always better to cover on the higher side. You should work with a reputable insurance intermediary who can help determine the amount of life insurance you need, by considering: • Is it a back-up plan for life, i.e., being prepared financially under any and every circumstance. It ensures that your family receives financial support in case you are not able to bring in the income yourself. • Replacement income need, i.e., the financial contribution you expect to make toward your family from now until retirement. It broadly should take into account salary, company benefits (if any, such as medical insurance), retirement savings, etc. • Survivor needs analysis, i.e., the amount of income needed for your family to maintain a desired level of income and lifestyle. • Inflation, i.e., protection value should be adjusted for inflation. It’s never too early to start thinking about life insurance and get the financial security you and your family need and deserve. It is better buy insurance while you are young and don’t need it because when you do need it, it’s too late and you cannot get it. 83
