1. What is a life insurance policy ?
A life insurance policy is the document that signifies that there is a contract of life insurance between the insured and the insurer. This contract benefits the beneficiaries of the insured in the event of the death of the insured. The objective of this type of insurance is to protect your loved ones from the financial burdens that could arise from your untimely demise, if you are the principal earning member of the family.
2. Do I need life insurance ?
Yes, if you have people in your life who depend on you for financial support. Insuring your life is a crucial part of your financial planning if your family members are financially dependent on you, or if you owe significant debts. You may have to take into account loans, mortgages, children’s education, medical expenses, etc. Setting aside a small premium every month could save your family from financial hardships later.
3. What kind of life insurance should I purchase ?
Not all life insurance policies are the same, and it is important to read the fine print before you settle on one. It is wise to mull over a few policies before you decide the right life insurance policy for your needs. Life insurance policies could be of two types: term insurance or permanent insurance.
4. What is ‘term life insurance’ ?
Under a term insurance policy, the insurer will pay your dependents a predetermined amount in case you die during the term of the policy. Term insurance usually has lower premiums, but if you survive during the term of the policy, you will not receive any returns. Term insurance does not build up ‘cash value’, i.e., the cash amount that your insurer pays you on cancellation of the life insurance policy in certain cases.
Term life insurance is sometimes referred to as ‘temporary insurance’ because it covers you only for a specified time period. After that, you must renew your insurance policy.