I am going to present my knowledge on Insurance,
this will cover, different types of insurance, some tips on how to select good insurance and tips on how much insurance individual needs.
To start with Insurance sector is divided into
Life & Term Life Insurance
Car Insurance or Auto Insurance
In todays post I will jot down my notes on Life & Term Life Insurance
I will try to put this post more in question answer type.
What is life insurance?
Life insurance is a contract, often called a “policy”, between you and an insurance company to provide money to a person you designate, in the event that you die during the time the contract is in force. In essence, during your lifetime you pay money, known as the insurance “premium”, to the insurance company. It promises to pay money to the persons you name, the “beneficiaries”, at your death. Some types of life insurance also give the policy owner the right to “borrow” a portion of the “cash value” within a policy, or to receive an “accelerated death benefit” if you become terminally ill or require confinement in a long term care facility.
Why Buy Life Insurance?
Life insurance protects those who depend on your paycheck. If you die prematurely, life insurance provides your dependents with ongoing income to replace yours. Life insurance should be an integral part of your financial planning strategy. A general policy can be an important planning tool:
1. Income replacement
If you have dependents, consider what would happen to them if they no longer had your income to rely on. Proceeds from a life insurance policy can help remove financial strain on your family after your death. Your surviving spouse or domestic partner could also see a reduction in future or present retirement income, so life insurance can help close this gap.
2. Pay outstanding debts and long-term obligations
Life insurance spares your loved ones the burden of paying for burial costs, credit card debts and medical expenses not covered by health insurance. In addition, life insurance can be used to pay off the mortgage, supplement retirement savings and help pay college tuition.
3. Estate planning
The proceeds of a life insurance policy can be structured to pay estate taxes so that your heirs will not have to liquidate other assets.
4. Charitable contributions
If you have a favorite charity, you can designate some of the proceeds from your life insurance to go to this organization.
Life Insurance as Part of Your Long Term Financial Plan
You may not want to think about it, but your death can be financially devastating to the people you love. At the very least, there are funeral and burial costs which can run in the thousands. There may also be estate taxes and outstanding debts to pay. If you have dependents, they will have to cope with these costs while no longer having your income to rely on.
The proceeds from a life insurance policy can be of tremendous value. The "death benefit" will provide economic assistance to your family right when they need it the most. It's not just a money issue. Life insurance benefits will help your family maintain their current lifestyle with no interruptions while they deal with the emotional fallout of losing their loved one.
There are many choices when it comes to life insurance. More than 1,500 insurance companies offer policies, so it's important to work with a knowledgeable insurance agent to sort out the best policy for you.
Before you buy life insurance, it's important to know what options are available to you. Here's a quick overview.
Cash value life insurance comes in many shapes and sizes. The best known is "whole life," which covers you for your whole life with no change in annual premium as you get older. Others include universal life, variable life, single-premium life and adjustable life. Getting multiple life insurance quotes helps you identify which one is best for you.
Cash Value Insurance
Unlike term policies that offer the most protection for your premium dollar, cash value life policies have a savings feature. After you pay premiums for a year or so, cash accumulates. Even under most companies´ best-case scenarios, however, it takes years for the cash value to equal your premiums.
A few companies offer no-commission or low-commission policies that build cash values more rapidly. These companies are a good place to get a quote to use for comparison as you shop. As you call around, ask companies for their guaranteed projections of a policy´s cash value after five, 10 and 15 years. Get multiple life insurance quotes before making a decision.
You can borrow against your cash value or draw it out by surrendering your policy (subject to a "surrender charge"). This "savings" feature and first-year commissions of up to 100 percent of premiums often make cash value life much costlier than a term life policy paying the same amount if you die.
Is Cash Value for You?
Is cash value life insurance ever a good buy? Occasionally. Some middle-aged people convert term policies to whole life to beat ever-rising premiums or (in the case of level term) to avoid non-renewal for health reasons. Cash value life also may offer tax advantages.
Before buying cash value life, hire a fee-only financial planner or tax adviser to review your options. Be aware that advisers who get insurance commissions have a financial incentive to sell you cash value life rather than term life.
If you decide to use a commissioned insurance agent, look for one with a "CLU" (Chartered Life Underwriter) designation. CLUs are well trained and must abide by high professional standards and a code of ethics. Cash value policies are so complex that even experts need pages of calculations to figure them out. It is wise, therefore, to avoid cash value life without expert advice.
Cash value life is so profitable for insurance companies and agents that consumers must watch out for unfair sales practices. Careful shopping pays when buying all kinds of insurance. Nowhere is this more true than when the product is cash value life.
Term life insurance is insurance that lasts for a specific time, such as 5 years or 10 years. The policy pays a death benefit in the event the insured dies during the specified period. Since term insurance is for a limited period and accumulates no cash value, the rates tend to be low for a given amount of insurance.
How much insurance will I need?
A simple straightforward reply would be 6 times of your annual income. Firstly if you're young your needs would be different from that of a middle aged individual.
Must choose the right company
Are you pondering over whether you should stick to LIC or trust one of those private insurers?
With our insurance regulator the Insurance Regulatory Development Authority setting stringent norms for insurance companies there's little reason to worry about your hard earned money.
and do some homework based on below facts.
• Promoters background
• Reputation of the Insurance company
• Track record of the company in settling claims
• Brand value: How strong is the brand value
After all - LIC is always there.. but be open and review to invest your hard earn money.
How to go ahead
If you know of a trusted insurance representative, you could start by reviewing your life insurance needs and existing coverage with that agent. Otherwise you might want to find an agent or insurance broker to work with you.
If you are person who prefers to do your own research, you can find plenty of insurance information and quotes on the Internet, or from direct marketing ads in magazines, newspapers,or in this My first blog etc.
It is in your own best interests to review and compare various offerings and prices.
Keep in mind that there are many insurance companies and they have different ways of selling their life insurance policies. Some may refer you to an agent representing their company while others will require you to fill-out a questionnaire before providing a quote or cost estimate.
You should pursue the approach and the specific offering that you are most comfortable with, and that works best for you.
visit different insurance providers
Give the data to insurance adviser,
Like your age, how many yrs you want to pay premium and how much insurance you need. Give these inputs to all insurance providers compare the results based on how much premium you need to pay and other benefits.
Dont select the insurance plan based on, your friend suggested, your uncle suggested or Insurance agent is your close relative. dont go by others word to invest your hard earn money.
These days ULIP is capturing market, as most of our friends became ULIP agent(ULIP companies pays big commissions),
I am not Insurance advisor nor gogint to say about specific ULIP.
Whatever plan you are going to select be ensure to ask question on
what are initial charges, and what are charges after 3 yrs. ie withdrawal charges and if want to continue what are AMC charges.
For a long term investor it is very important to know the AMC charges. most of ULIP charge 2%, do some market study you can get best of it.
Most of insurance advisor suggest about, some ULIP plan and a term plan. Again a mixed of insurance and investment.
This year I have done investment in mutual funds(ELSS)+ Term plan(from SBI- life shealth). But in MF also AMC charges are huge.
compare the ULIP with MF+ term plan on long term investment view, ULIP beats MF+term plan combination. In ULIP the trick is one has to know when to swtich between the options provided by the ULIP provider. If you are going for ULIP, take the ULIP from agent who also assists in timely swtich between plans(one more point for comparasion, check out the switch charges also).
After all its our hard earn money ...
And all the best in choosing the right insurance..
Keep on reading..my next post will be on Auto Insurance...
enjoy reading..and put your comments/questions down.
I am going to present my knowledge on Insurance,