Checklist for buying Life Insurance Policy

It is important for you to know answers to a few crucial questions before buying an insurance policy. This not only helps in understanding the policy better, but also ensures peace of mind during the entire policy term and afterwards. In this article we shall cover what questions to ask one before buying a life-insurance policy, understanding the policy, terms and conditions.

What you would like your life insurance policy to achieve?

Ask yourself what it is you want the insurance to do. For example, do you want to have coverage that will:

Pay the outstanding balance owing on a mortgage and other debts?

Offset the loss of your income? For how long?

Contribute to the future education of your children?

A combination of all or part of the above?

Knowing what you would like to accomplish with your life insurance policy will help you determine how much life insurance you need to buy. If you have insurance before then what is the purpose of the new policy? What value will it add to existing policy? Why are you buying the policy?

Who would you like to insure?

Most life insurance companies offer a variety of products to suit your lifestyle and family. You can get a life insurance policy

On your own life, or

You can get one policy for both you and your spouse (called a joint life insurance policy) or

For your child.

Remember that the purpose of insurance is not to soothe us emotionally, but rather to mitigate the financial losses we might suffer if some unfortunate event happens. Identify the potential events that would be catastrophic in a household. This means events that would cause a family to suffer serious financial losses and that would cause its members to substantially change their lifestyle and goals. These are risks crying out for cover, such as the death, serious illness, or disablement of the bread-earner(s). Although the death of the breadwinner(s) is catastrophic from a financial point of view, the death of a child, though awful, is not likely to be.

Biggest advantage of child insurance plan is the benefit of premium waiver. In case of child plans, if the proposer, usually the parent, dies then the future premiums of life insurance policy are waived off for the child’s benefit. These types of plans are double benefit plans. At the time of death of the life insured, the sum assured would be paid to the family to meet the immediate expenses but the policy continues. The future premiums are waived off from the policyholder, but the insurer continues to pay the premiums on behalf of the life insured, so that the maturity benefit is secured for the child’s future.

Joint life insurance policies

Joint Life insurance policies are designed to enable two people, typically spouses or business partner, to share in one life insurance plan. It covers two individuals (spouse, business partners) under same policy i.e. jointly. Since the probability of claim is twice than of individual life insurance plan, the premium is bit higher than single individual life insurance plan. Also if claim is made, the policy gets terminated after the payout. However joint insurance policy is cheaper than buying two individual term insurance policies.  Joint Life Insurance could be endowment or term plan; If the policy is a joint endowment policy, the cover amount (sum assured) is payable on the first death and again on the death of the survivor during the period of the policy. If one or both partners owning the joint policy survive to the maturity date, the cover amount and the vested bonuses are payable on the maturity date.

Source: http://blogs.rediff.com/lifeinsuranceplans/2016/06/22/ritikashah11998-17/