Generation after generation, people realize the value of life insurance. Life insurance is a savior that helps your family cope financially even when you are no longer with them. Life insurance is the foremost important policy to invest your hard-earned money. Life is uncertain and we never know what might happen when. Hence, it is always better to take precautions instead of ending up in a difficult position where your family will suffer. The only problem is that people often cannot make the right choice and get confused regarding which policy best suits their needs. With life insurance, there are three main options; it becomes challenging to choose the right one, and people often get stuck.
Here is a detailed guide to help you choose the right life insurance policy for yourself and the factors you should consider when choosing it.
1. Coverage Requirement
This is the amount that your family members will receive. This largely depends on the number of people and the extent to which they are dependent on you. If there is a regular income source even in your absence, your family may require comparatively less financial security than a family in which there was only one bread earner. If you plan to incorporate a special event like education, marriage, business setup, etc. in the coverage, you may want a policy that offers greater coverage.
2. Your Age
If you start at the right age, you can get a better insurance policy at a lower premium. Many policies are age-specific, which means that you cannot invest in them after you have passed a certain age. So you might want to plan while choosing a policy or else you will have to pay a higher premium for lesser benefits.
3. Annual Income
This is one of the primary factors taken into consideration when choosing a life insurance policy. Firstly, this determines the amount that you can invest in the policy. Secondly, it is believed that the ideal life insurance policy should be around 15 to 20 times your annual income. Since your annual income does not remain constant, neither does the insurance premium. You always have the chance to update the policy according to the changes in your income.
The premium defined by the insurance company also depends upon your lifestyle. The premium defined for non-smokers and non-alcoholics is lesser than that for smokers and alcoholics. In general, the healthier and younger you are, the lower will be your premium and you will have access to a better policy.
While you choose your policy, you must keep in mind all the liabilities that you may have. Make sure to consider the loans, market debts, and any investments that you may have.
6. Type of Policies
Many of us are not aware of the types of policies available at our disposal. Here is a list of the different kinds of life insurance policies:
- Term Life Insurance: This type of policy provides full coverage for your entire life in the case of any event.
- Whole Life Insurance: This policy provides life insurance coverage till the age of 100 years.
- Endowment Life Insurance: This policy provides a dual benefit of insurance as well as saving.
- Money Back Policy: In this policy, there is a periodic sum return along with the insurance benefits.
There may be more policies offered by your company. Some may be aimed at retirement, some at securing the future of your children, and so on. Whichever policy you choose, make sure to keep in mind all these factors. A life insurance policy is a secure, long-term investment that ensures financial security to your family when you are no longer around or if your income has been interrupted due to an injury. If your family depends on you, getting such a policy becomes crucial.