- The real reason for a life cover is to protect your family if you die untimely.
Never buy life insurance due to fear, greed, pity, frustration, taxes.
What is the value of a life insurance?
- It is not the values of the policy when it matures
The real value of your life insurance is the amount that the beneficiary gets if you die
How does it look like in its purest form?
- It is called a term plan
- It should pay your beneficiary (usually your family) a lump sum when you die for the price of the premium.
- If you outlive your policy, you don’t get any money.
- The premium of a term plan does not change (generally) once you have bought a policy.
What should be the coverage amount I should look for?
- Think of all the expenses that the family has ahead of them.
- Think of the amount of money that they will need to put in a fixed deposit to generate a regular income (to support those expenses)
- Use Thumb rule to calculate the life insurance cover amount
When NOT to buy a term cover
- If you have dependents on your income, you don’t need a life insurance, since there will be nobody to miss your income
- If you are financially free, you do not need a term cover.
You can terminate your term insurance
- The job of the life insurance cover is to serve you till you are debt-free and financially independent
- The moment that happens you can stop your term insurance. You lose nothing if you terminate it.
Additions to life insurance
When buying a policy
- Policy should be a mix of a cheap plan from a company known to honour its claims
- The premium of the policy gets locked to the price at the time of buying
- Buy online - Cheapest, due to absence of agent commission
- Check the claims experience of the insurance firm
- Claims experience should be more than 95%. This means that the company pays more than 95% of the claims filed.