If you have dependents read on…
A 5-minute read for a peaceful existence and life after!
“The purpose of life insurance is simple: If God calls you home today, your kids won’t go hungry.”
If the above quote makes sense, the following information is worth reading. By the time you sip your coffee/tea or breezer/cooler this summer at the end of this article, you will be calling an agent or friend who knows a little more about LIP service (Life Insurance Policy).
Key Takeaways
- When do you need to invest in LIP?
- How does it work?
- Choosing beneficiaries
- Payout structure
While there is a general awareness of Life Insurance Policies the lack of knowledge to invest steers towards information overload. This blog tries to provide the basics associated while buying a policy. With the above key takeaways as a primer, you can avail the best LIP provider in India.
When do you need to invest in LIP?
Aah! It is like checking out the long coffee menu at Starbucks. It is confusing and difficult to make the choice. So let’s begin with the right time to invest and which one is ideal.
The simple thumb rule to know the time is ripe:
- Marriage is on the horizon and there will be dependents like wife and children.
- Crossed the age of 30 and yet single? Financial planning with a policy makes sense.
- Has your salary bar been raised? Definitely, you need to call the agent.
Insurance is important at some point in your life before you hit the age of 35 years whether you are married or not.
Probably the next quote will make you take a decision quicker.
“A man who dies without adequate life insurance should have to come back and see the mess he created.”
LIP benefits
A life insurance policy is a document you sign with the service provider (private or linked to the government).
Once you have figured out how it works and its benefits, choosing the plan is clear. It is a sure-shot way to provide financial protection to a loving family and dependents. It is designed to pay an assured sum to the family upon the death of the person in whose name the policy is assigned. You could opt for a term policy or a permanent one. These days there are several options (like the coffee menu) to suit individual and family needs.
Basically, if the insurer passes away the income is replaced by the policy.
Is it not a great way to make sure there is no mess when income dries up or the insurer dies? Maybe you will retire and need a passive income. Sure, this is one reason why a life insurance policy is beneficial. Consult a professional agent to know how it works and its benefits. He will understand your current financial situation and potential beneficiaries in case of death or retirement.
Choose beneficiaries with care
“If people understood what life insurance does, we wouldn’t need salesmen to sell it. People would come knocking on the door. But they don’t understand.”
Ben Feldman
A spouse is the best and should be the prime beneficiary of a general term LIP. Minor children can be included once they come of age. Multiple beneficiaries could be:
- Parent/s
- Child (should not be a minor)
- Trust or Fund
- Business Partner
- Charitable organization
Invest in a policy at a young age. As we age, insurance premium is expensive. Other factors like medical conditions, accidents and income levels are factored in. You will get peace of mind if there is some money to fall back on in the winter of life. Ageing adds the following costs to the life insurance policy.
- Cost of living
- Inflation every few years
- Coverage from the policy
- Professional career changes
- Other means of saving and financial planning
- Multiplying annual income
Assess your financial condition with the family and then consult the agent.
“Always plan ahead. It wasn’t raining when Noah built the ark.”
Payouts – The ultimate need of a policy In the end, each one of us wishes to know the payouts (of the policy) on death or survival. There is a choice between lump sum payments, instalments and annuities. When life insurance policies started almost 200 years ago, most beneficiaries cared to get lump sum payments after the death of the insurer.
Times have changed and so have the requirements of dependents and beneficiaries. This is why instalments and annuities have come into the picture. Policy holders take payouts in instalments to survive and live longer. This amount could also be subject to taxation and the agent’s consultancy is required in advance.
It will be worthwhile to understand if a policy can be taxed at any stage. As Income tax rules change periodically, the agent can inform the policyholders about it.
Are you interested in buying a general life insurance policy? Why not connect with your agent or associates to know more?