Life insurance is important for those who have people dependent upon him in his family. Life insurance is like an agreement between policy holder and insurance company which ensures that if the policy holder dies, then the nominee mentioned by policy holder will be paid by the insurance company.
Let's take an example: A boy named Arun, aging around 35 years, wants to ensure his family's financial interest. He believes that is he dies due to any reason then 5 crore rupees would be enough to fulfill the financial needs of his family. The annual income of Arun is Rs. 20 lakhs and he don't have Rs. 5 crores in lump sum which he can keep to face any emergency. The simple way to overcome such situation is that he takes life insurance of Rs. 5 crore which could be for 20 years or more.
Needs changes with passage of life
If your salary increase or any new member comes in your family, then there is a need to expand insurance cover. Each increment decreases the difference between life assured and net worth. This means that insurance cover will also reduce. But in most of the cases, the situation is reciprocal to it. It is not possible that you take an insurance cover to save yourself from all risks. Also, the need of insurance cover increases day by day. Thus it is better to find new options to reduce risks.
Some people but insurance cover because they are able to pay its premium. People should find such investment resources which provide different life insurance and investment options. It's better to stay away from the plans which provide life insurance cover along with the investment. Such policies offer maximum of fund value and ensures the amount at the time of death, divides its premium into parts- life insurance and investment. And it pays only maximum value of these two. On the other hand, if you take any term plan and investment in mutual fund, then you get assured amount and also get the benefit of investment.
If the financial position of your guardian is strong and you are young & single, then you should avoid life insurance. There are many other options of investment which provide better returns. If you think that if you will not take life insurance at young age, then you will lose its benefits; then there are other ways to prevent yourself from such situation. As your career will go better and your investment increases, you will reach near to the target amount even without life insurance. The more you will be far way from this target secured fund, you will feel the need of life insurance more.
Limitations of life insurance
Suppose that if you ever get suffered from any disableness then life insurance will not help you more. Even if the provision of disability is included in it, even then you will very limited amount. Some policies permit you to withdraw money after a fixed time period, but many conditions are attached to this also. So it is better to be prepared for long lock in period. In some cases, dependents are not paid funds by excusing that major information were not filled in application form. Thus you remain with empty hands.
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|Author: Arindam Hira 29 Jan 2011||Member Level: Gold Points : 1|
First of all Insurance and Investment are two separate things. Insurance is be better called as safeguard to dependents' interest, personal health and other valuable goods. These are covered by different kind of insurances as per need of the proposer e.g Life Insurance, Health Insurance, vehicle Insurance etc.
On the other hand investments are done for capital appreciation or to earn profit. Investments involve risk. The more risk taken by the investors chances of profit maximizing is greater. e.g. Investment in Government Bonds is of low risk and return is also limited. Investment in Stock is of higher risk but chances to gain huge amount of profit is more.
I think I could clear the difference. An individual should first safe guard his/her dependents' interest by Life & Health Insurance then secure his family with low risk investments then should try to invest a portion in speculative market to maximize his/her yield.
Please read my Blog www.arindamhira.blogspot.com
|Author: Pravat Kumar Das 12 Sep 2014||Member Level: Gold Points : 7|
|First of all Life insurance is not an investment option. This product has been designed specially to transfer the risk to others by giving small premium. Although ULIP or other whole life plans give you back after your policy matured or after surrender value that does not mean you should invest your money in life insurance. This is only to reduce your life risk. Suppose the earning person passes away to avoid problems to his/her dependents this product is available.|
In some cases like term insurance and health insurance we do not get back our premium paid although we never avail any service from them.
So instead of choosing a whole life plan, it is always advised just have a TERM insurance which needs to be paid very low premium with high sum assured coverage. And rest of your money can invested in other options like equity market, mutual funds, Government issued bonds etc.
If you are not aware how to invest, where to invest and what should be your percentage (amount) of investment in which option, please consult a financial planner or professional. After analyzing your requirement, and risk taking capacity they would guide you better which not only protect your life, also it gives you a lump sum money after your retirement and also you can be making money in meanwhile.