When we are young, we often tend to take things lightly and believe in living in the moment. The mantra is to seize the day and enjoy life to the fullest. Big decisions like buying a life insurance policy and investing in a health cover do not even make it to the to-do list. However, as we grow old and life starts throwing challenges in the form of illnesses and other unfortunate events, it is often too late to correct the mistakes.
So, it is inevitable to have healthy financial discussions with your significant other as you don’t know what the future holds. Regardless of how much you earn, it may end up being less when an unfortunate event strikes your family. Therefore, it is crucial to secure the future of the family with a life insurance policy whether you are the single breadwinner of the family or not.
To make things easy for you, here are the most important things that you need to know about life insurance.
Why Do You Need It?
Simple because you have a family to look after – wife, and possibly young children. In case of any unfortunate event, it’s natural to choose what’s best for your family.
A life insurance plan is a necessity in this unpredictable world. It will make sure that your family’s future is secure and that they continue to prosper even after an unfortunate event such as your untimely demise. It will also provide financially in case of temporary disability, leading to a loss of income.
When you invest in a life insurance policy, you’re building your wealth in a planned manner. It will help you accomplish future expenses such as paying for your child’s education or even buying a house. Not to forget, it helps in retirement too. There are tons of insurance providers with different life insurance policies and even more confusing terms and conditions. Seeking out simplicity is natural.
Why Buy Life Insurance at a Young Age?
Insurance premiums are always positively correlated as one grows older. Economically speaking, you would end up paying a higher premium for the same benefit at a later age. When you’re young and healthy, it’s the best time to buy a life insurance cover for your family. Life insurance is dependent on factors like family, health, mortgages, financial status, and more.
So, make sure you treat life insurance as an essential part of your financial portfolio.
How Much Cover Do You Need?
Having this question running through your mind is natural. With so many options for life insurance plans, it can indeed be confusing. Simply put, the younger you are, the higher life cover you should target. Traditionally, ten times the annual income is targeted; however, since you’re young, you can target 15-25 times your annual income.
Even though targeting a life cover 20 times your annual income may look unrealistic, it is not. If you account the time value of money, the amount you’re targeting is not actually that big.
Some insurers will provide life cover up to 20 times your annual income just because you’re young. So, it’s wise to opt for a higher cover from early on and safeguard your family’s interests.
How to Choose the Right Plan?
This is possibly the most difficult and crucial question you will face when ticking off the best plan from the list. Thus, try to make the best research and then take the decision. There are various plans available in the market. Each one of them offers various benefits that cater to a wide range of customers. Top three of them are as follows:
- Savings Plan: Ideal for millennials, this is a simple plan that offers guaranteed returns at a fixed rate. You can choose a plan that can help you meet short-term as well as long-term goals. So, whether you wish to buy a house or send your child to a medical college, savings plan can help you reach your goals in a systematic way.
- Term Insurance Plan: This is another basic plan whose main aim is to offer you pure life cover. If you are buying an insurance plan for the first time, this is a good option to begin with. It provides you coverage for a specific tenure. If something unfortunate happens to the insured during the term of the policy, the nominees are paid the death benefit.
- Unit Linked Insurance Plan: Also called ULIP, this plan offers a unique combination of investment and insurance. In a ULIP plan, you are required to pay monthly or annual premiums – one part goes in insurance while the other one is invested in the market. Various other features make ULIP a great choice to achieve long-term goals. Some of them include higher returns, flexibility, partial withdrawals among others.
Apart from these, there are several other plans you can consider. Once you have selected the plan, look for important things like claim settlement ratio and carefully read the terms and conditions of the insurer. Selecting the right plan is crucial for your family’s future; thus, be judicious and decide only when you are sure.
How and When to Increase the Cover?
Don’t just buy a cover, monitor it regularly to check if it is matching up to your future needs. Moreover, there will be multiple reasons that will require you to reassess your plans. Whether it is the birth of your child or their education, some important events of your life can make it necessary to increase your current cover. For this, you can add riders to your plan and enhance its utility effectively.
Investing in a policy that acts as an umbrella for your family in times of need is undoubtedly a big decision. With so many insurers offering the same thing, it may get challenging for you to choose the right one. The trick is to analyse the features thoroughly and go with insurers who offer simple-to-understand plans. Insurers like Future Generali provide different kinds of plans that help meet various life needs including health, investment, child’s education and savings. Such insurers are also offering online buying of their various plans.