What is Life Insurance?

Life is full of uncertainties and one knows not what will happen in future. Of course, most of us will want to die at a ripe old age and leave behind abundant wealth for our family. But, life can take any unexpected turn at any moment and all the hopes and wishes can be dashed in a moment. Life insurance is there to provide for your family in case of your untimely demise. Well, it is not a very welcome or happy thought, but the sole reason behind the concept of life insurance is to provide you the peace of mind that in case of such an unfortunate eventuality, your family will be taken care of.

When you buy a life insurance, you have to pay premium as decided by the type of policy you are choosing. It can be monthly, quarterly or on an annual basis. The term of life insurance can be as short as a year or it can span over a life time. When one dies within the term of the insurance, your nominated beneficiary will receive the insurance amount.

People opt for life insurance for a number of reasons. It can be to reduce risk exposure of debts, for repayment of debt after death, provide for the family for the family after one’s demise, and pay for the funeral or to secure the future of the children, etc. If you are a business owner, it becomes essential for you to have a life insurance as your death can have long lasting financial implications.

Life insurance is risk management financial tool and should not be considered as a saving tool. Before buying a life insurance policy, you need to ask yourself if you really need it.

Who Needs A Life Insurance?

Ideally a person who is single and has no dependent doesn’t require a life insurance. This is because life insurance is not meant to insure the person but to help his family after his death. But, if you have a family or any dependents, then you should definitely consider buying a life insurance policy. So, if you decide to get yourself one ask yourself these questions.

• Do I really need life insurance?
• How much it will cost me?
• How long it will cover me?
• What type of policy should I go for?

The needs of life insurance may vary from family to family. You should take into account various factors like your income, expenses, savings, family goals, etc. As a rule of thumb, go for a policy coverage that is equal to 6 to 10 times your gross annual income. Well, it is just a rough idea and you can customize it as per your family needs.

Life insurance companies have various requirements and they take into account various factors like your age, sex, health, medical conditions, family history of medical conditions, your smoking habits, etc. Taking all these factors into account your premium will be decided. Many insurance companies don’t cover suicide or suspicious death situations. So, one should for buying it only after evaluating the various pros and cons of it.

In our next post, we will discuss the various types of life insurance.