How to Do it Right?
Here are some points that you should keep in mind when purchasing a life insurance policy:
- Consider The Primary Objective of Life Insurance: The primary objective of a life insurance policy is to safeguard the financial future of your family and dependents from uncertainties in life. In case something were to happen to you, your life insurance policy should not only help cover the immediate financial emergencies, but it should also help supplement loss of income, help the family stay on track for future goals and events, and expenses towards your child's education or marriage.
- Don't Buy Insurance Only to Save Tax: When you are looking to invest in a life insurance plan, you need to weigh every single aspect of the investment, rather than blindly buying an inadequate or ill-advised insurance plan to save tax.
- Calculate the Right Coverage and Add Riders: You need to calculate the coverage you require to meet current and future needs. The amount should be enough to provide your family with a comfortable lifestyle, meet their financial goals, and also pay for major liabilities such as loans and mortgage.
Life insurance policies come with various riders such as accidental death, permanent disability, critical illness, etc. Understand these well and add the ones relevant to you and your lifestyle to your policy. If you are prone to certain lifestyle diseases and ailments, these can help your family mitigate risk by being prepared for an eventuality.
Choose the Right Tenure, Add Spouse Cover if Needed
Think through the right tenure for you. This depends on how much premium you can comfortably pay today, as well as how long you desire to work. Choosing a tenure of 30 years when you plan to retire in 20 is not a wise thing to do, as it will add stress to your golden years.
Also, look at whether you need a spouse's cover or not . Many policies offer an optional spouse cover that covers your spouse under the same policy. Not only does it help mitigate risk, but it is also cheaper than buying a separate policy for them.
Consider the Ideal Payout Option for Your Family
Next, check the payout option that would be the most ideal for your family. Would you need a lump sum payout, or monthly payout or a combination of both to ensure that your family's expenses are taken care of?
Prioritise Protection Over Tax Savings
While prioritising tax planning might save you some money in the present time, it could prove to be an expensive mistake in the future. Therefore, don't worry about saving until you are sure that you have secured your family's financial future. And if you don't wish to spend a huge amount on premium every month, you can consider opting for an inexpensive life insurance policy, such as a term plan.
