What is Life Insurance?
Life Insurance is a contract between a person and a life insurance company to reimburse his/her beneficiary (usually a spouse or child) at the time of his/her demise. The reimbursement amount is pre-decided based on the terms of the policy.
Why is Life Insurance useful?
Life Insurance is useful to provide your family with financial security in case circumstance throws you into a situation where you cannot earn or in the case of your premature demise. It helps keep your family in a position to enjoy financial security even after your demise. Life insurance policies also offer you the ability to save, which helps provide financial stability.
Is Life Insurance necessary?
Life Insurance is not necessary but is a smart investment to make, especially if you have a dependent spouse and children. It offers your family the benefit of financial support even after your death. In addition to this, it offers a number of advantages and provides a lot of flexibility on your investment. For example, you can add a critical illness rider to cover the cost of expenses for surgeries and operations; you can withdraw a part of your maturity benefit in case of an emergency or for your child’s education or marriage, etc. Life Insurance policies come with a lot of flexibility.
How do I decide on the amount of life insurance I need?
The amount that you receive on maturity depends on the amount of premium you pay. The maturity benefit you need depends on your standard of living, income, spending habits, etc. You should aim to receive a maturity amount equal to 8 to 10 times your annual salary.