Necessity of Life Insurance Policies: You should be aware of! - Make Money Online

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Necessity of Life Insurance Policies: You should be aware of!

Life insurance is a very important financial product that everyone should consider getting. In fact, life insurance is so vital that every family must have at least one policy with them. Life insurance is not limited to the breadwinner of the family. It can also be useful for a stay-at-home parent. Are you aware of the key life insurance features like these?  

Important features of life insurance that you must be aware of

People perceive a life insurance plan as a product that combines insurance and investment. While this is correct, life insurance has many other features that make it an absolute must. Some of them are:
  • Life insurance is not only for investment: The main purpose of a life insurance plan is not to invest your money. Rather, such a plan is primarily taken to cover the life of the policyholder. Most life insurance plans offer a return on investment if you outlive the policy period, but that is not why you should buy a life plan. There are other financial products that offer better investment options. The life plan works because it promises to keep your dependent family members financially secured if you die unexpectedly. This is the primary objective of buying life insurance.
  • Life insurance is not just for the breadwinner: A life insurance plan pays out a lump sum amount of money if the policyholder dies. The money is largely used as an income replacement of the breadwinner. But what happens when a stay-at-home parent dies? Who takes care of the household and who pays for the nanny that has to be brought in? Keeping such things in mind, it is essential to buy life insurance for all the contributing members of the family.
  • Life insurance is not only for income replacement: Do not step away from buying life insurance if there are other earning members in your family. Life insurance doesn’t only replace your income after your death. The death benefit received also helps clear your mortgages, pay for the funeral costs and helps pay for planned education and medical costs of your family members. So you must buy a life insurance plan even if there are other sources of income in your family.
  • There are three main players in life insurance: There are three main players in life insurance – the insurer, the policyholder and the beneficiary. All of them have vital, yet distinctive roles to play in the policy. The insurer issues the plan and promises to pay the sum assured at the time of a claim. The policyholder buys the plan and maintains it by paying the premiums on time. The beneficiary receives the sum assured at the time of the claim and completes the purpose of buying life insurance. As a policyholder or a beneficiary, you must be aware of your role and know what you must do to keep the policy active and get the benefits out of it.
  • Riders are useful: Riders are add-on covers that you can buy at an additional cost. There are many different kinds of life insurance riders available. These riders help customise your plan and make it work more effectively for you. So rather than buying a basic life insurance plan, add a few riders and make it more useful. The common life insurance riders include the critical illness rider, the accidental death benefit rider, the waiver of premium rider and the disability rider, among others.
In a nutshell

People often make some crucial mistakes when buying life insurance. This happens because they are unaware of the many features of the life insurance plans. Prevent yourself from making any such mistake and buy a life insurance plan that would give you the best coverage. Keep the aforementioned points in mind and your job will become a lot easier.
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Necessity of Life Insurance Policies: You should be aware of! Necessity of Life Insurance Policies: You should be aware of! Reviewed by Unknown on 5:05 AM Rating: 5