In this blog, we will aim to cover the most important aspects of Life Insurance.
What is life insurance and why do I need it?
In simple words, Life insurance is an agreement between you and an insurance company where you promise to make regular payments (premiums) in exchange for a lump-sum payment (sum assured) to your beneficiaries upon your death.
Here’s why you might need it:
Income Replacement: If you have dependents who rely on your income to meet their financial needs (such as a spouse, children, or elderly parents), life insurance can replace your income to support them after you’re gone.
Covering Debts: Life insurance can help cover any outstanding debts you may leave behind, such as mortgage payments, car loans, or credit card debt, ensuring your family isn’t burdened with these financial obligations.
Estate Planning: Life insurance can be used as a tool in estate planning to ensure your assets are distributed according to your wishes.
Life insurance is like a safety net, giving you peace of mind knowing your loved ones are financially protected if anything happens to you. But remember, the right type and amount of coverage depend on your unique situation. Take a moment to evaluate your finances and discuss with your accountant/financial advisor to find out how much insurance coverage you should take.
How much should I insure myself for? How much money should I invest in insurance per month/ year?
The amount of money you should invest in insurance per month or year depends on various factors such as your financial goals, current financial situation, lifestyle, dependents, and risk tolerance.
It’s extremely important to assess your needs and budget carefully. Planning ahead in time will only help you and your family in the long run.
Example:
You’re 32 years old and need 1 lac per month as a monthly expense and have 1 crore of loans. Taking the inflation rate of 4.75% you will need around 4.5 lacs per month at the age of 60. If something were to happen to you then your family will need a minimum cover of 5 crores which will take care of the debt and future expenses.
Have a look at the available NRI insurance plans listed on the website. Alternatively, you can reach out to us for personalised guidance to find the right coverage.
Will my life insurance premiums increase over time?
Generally speaking in most circumstances your annual premiums remain the same for the policy term at the time of taking out your policy.
Why should I buy life insurance at a young age? I am still in my 20’s.
An important factor to consider is that premiums usually go up as you get older. To insure a 23-year-old vs a 33-year-old for 1 crore on a simple term insurance policy for 40 years would be 50% more expensive if the policy was taken when the individual was 33 years old.
Simply put – you will save more money and get the same cover for the same period if you start early in your life.
Will my beneficiaries receive the life insurance payout tax-free?
In case of the death of the insured person, the sum assured component will be paid out tax-free to the nominee of the policy.
What happens if I miss a premium payment?
Generally, your insurance company will give you a 30-day grace period to pay your insurance premium from the premium paying due date. Please check with the insurance company before the policy is issued as each company has different grace periods.
Is it important to add optional coverages to life insurance policy?
Coverages like accidental benefits, loss of income due to disability, and critical illness are some of the additional coverages offered by the insurance companies. These additional coverages differ by company and insurance plans. Adding any optional coverage will cost additional money which will be added to your total premium. These types of additional cover act as a security blanket and having them as a part of your life insurance cover is dependent on individual circumstances.
