The Buyt Desk
Life insurance is an important aspect of financial planning and is essential for your family’s financial security. It is a contract between a policy buyer and the insurance company to pay a lump sum amount of money to the nominees of the policyholder if he/she dies. In exchange, the policyholder pays a regular premium for the policy. This is how you buy financial security for your dependents.
Here we have listed some tips for buying an insurance policy.
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Confirm if you really need a life insurance policy
Life insurance is important but it is not mandatory for every person. You can apply for any plan if you’re in any of the following situations.
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Someone is financially dependent on you and needs financial support for his or her financial needs after your demise.
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You are the only breadwinner in your family and wish to secure the future of your family.
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You want to cover the investments for your funeral and burial at least so that you don’t need to lose your assets for your legacy and heirs.
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Your estate would not have sufficient liquid assets to protect debt and taxes, eroding the legacy you have planned.
If you are not in any of these situations and are an unmarried person with no one financially depending on you, it’s not necessary to opt for life insurance.
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Select the type of insurance
Determine which type of insurance you require.
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Term life insurance is the right choice if you believe that you will have considerable savings to help your loved ones after your term ends. This insurance policy expires after a certain period such as 5 years, 10 years, 15, or 20 years. After the expiry date, you will have to purchase a new policy.
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If you want insurance cover not for a specific period but for the entire surviving years of life then whole life insurance can be a plan to look at.
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There are insurances that are clubbed with an investment like unit-linked insurance plan
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Determine how much coverage you need
This one is the most confusing process of buying life insurance but important as well. Decide on the investments you wish to be covered after your demise. For example, college tuition, mortgage, funeral expenses, and different types of debts.
There is no benefit in purchasing a policy with low coverage if your family doesn’t get enough support to sustain their current lifestyle as they live at present time with your current earning. Income replacement is also significant if your better half requires cash flow but is not in a condition to give it on their own.
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Finalize your financial goals
The main purpose of getting life insurance is to secure your future financially. The premium payments go towards the well-being of your loved ones after your demise. Ensure that you have savings and allocate your investment in a manner that it could serve as a secondary stream of earning for your family. So, be sure of your financial goals.
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Look for the best insurance policy
Now that you know about various categories of life insurance, start finding reliable insurance companies. Perform detailed research and shop around to choose the right policy. Compare their quotes and go through their plans to confirm if it best fits your financial requirements. You can also hire an insurance agent for your support or compare different prices online to make your search and selection of insurance plans easier.
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Prepare and submit your application
Life insurance applications usually need the medical history of a borrower and their family and beneficiary details. After completing the documentation process, you may need to take a medical exam to make sure you do not suffer from any terminal illnesses. If any tests come out inaccurately, your application is likely to get rejected.
Age, lifestyle, family medical background, gender, smoking, driving record, and health are some important elements for most applications of life insurance. Standard identification proof will also be required such as a driving license, U.S. passport, or social security card before an insurance policy is written.
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It’s time to pay premiums
After completing all the processes, an insurer will approve your application and your policy will get active once you pay your initial premium. You can rest assured about your financially secure future as long as you pay the required premiums on time.
Conclusion
These are some rules that can ease life insurance purchasing options. But, before you buy any plan, research company reviews and consider the death benefits you require. Check the coverage of each insurance plan and thoroughly read the terms and conditions associated with the policy to avoid any problems while claiming the insured amount. Figure out if you would require adding any riders to the selected policy. Also, make sure whether you have to pay the annual premiums at once or in installments. After purchasing a policy, tell your beneficiaries about an insurance company, where to find the policy documents, and all associated things.
