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When Does Buying A Term Insurance Makes Sense ?


Basically there are just 2 types of life insurance products anywhere in the world, though there are endless variants of both these types :

1.Term Insurance

2.Endowment Plans.

The second kind has a savings/investment component, the first doesn’t.

An oft repeated thumb-rule in the financial advisory trade, is to generally recommend that clients simply buy term insurance for their protection needs and look to mutual funds etc. for their investment needs. Combining protection and investment, according to this school of thought ,leads to sub-par results on both fronts.

My advice is a bit more nuanced. As long as a person can afford it, I recommend certain Endowment Plans, such as the now withdrawn Whole Life Policy of the LIC , over Term Plan+ MutualFunds or Term Plans+ PPF etc. I believe that such plans make for excellent investments returns-wise and tax-wise and allow people to enjoy predictability and stability in their wealth portfolio over many decades. Along with the flexibility to change plans as and when required.

However, I do believe that Term Plans have an extremely important place in one’s finances. Following are situations when you must absolutely opt for Term Plans:

1.If you are a wage/salary earner with a large number of dependents and have no large income from assets or businesses ,no stock-pile of assets that can be cashed in or otherwise tapped to provide for your dependents, the first thing you must do is sit down with a term insurance calculator and figure out just how much money you need to somehow find the money to afford the term insurance you need to provide for your dependants in case of your sad demise. You are ultimately their only hope for a better future.

2.Should you decide to become self-employed, or tap into assets such as your home to borrow the money to set up a business, make certain you have enough Term Insurance to cover your loans and business liabilities, especially if you have not thoroughly segregated your personal and family assets from your business assets.

3.Adequate keyman insurance for personnel crucial to the survival of your business.

4.If you are taking out  huge mortgages to finance home purchases, you can consider a term insurance to cover repayment in case of your demise. However, I find that mortgage insurance/home-loan insurance often works out cheaper and is often available to older people who might no longer be eligible for Term Insurance or larger sum assureds in case of Term Insurance.

So Term Insurance has its time and place in your financial life. Use it wisely as needed.

 

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Buying Life Insurance – A Balancing Act


wealthymattersThe conventional financial wisdom is that people best serve themselves by purchasing an online term insurance plan and investing the rest of the premium in diversified equity mutual funds. I have a slightly different take on the matter. Let me explain. Many readers have remarked on the difference between my stand and that of other experts.

If you are young, just started working, have little savings, come from a family with little savings, are the sole or main bread-winner of the family and have many dependents, an inexpensive term insurance plan is your best bet. Even as you work towards building wealth, you don’t put your loved ones at the risk of destitution, should something happen to you.

Also if you are older but have to provide for home and children and perhaps have mortgage and car loans etc. outstanding, you’d do well to increase insurance cover via a term plan for the duration of these loans to ensure that in your absence unpaid loans don’t add to your family’s miseries. Read more of this post

Why Does An Online Term Insurance Plan Premium Differ Between Companies?


wealthymattersWith an ever increasing awareness about term insurance policies, there is a lot for a person to choose and gain from.Insurance companies are  making it much easier for people to purchase term policies. One such initiative is online term insurance that allows you to seek life cover from the comfort of home, a fuss free way to buy insurance!

Statistically, one online term plan is bought every five minutes in India. The number of customers buying online term policies have risen from 500 to 15000 per month. However, there is still great concern among buyers as to why the premium of online term insurance plans  differ from one company to another. Here are the reasons: Read more of this post

The Difference Between Life Insurance And Life Assurance


Wealthymatters.comThe average person thinks that Life Insurance and Life Assurance are different names for the same thing. Many financial commentators too fail to note the difference.Life Insurance and Life Assurance perform different financial roles and are poles apart in cost – so it helps to buy the correct product.

Life Insurance provides you with insurance cover for a specific period of time (known as the policy’s “term”). Then, if you were to die whilst the policy is in force, the insurance company pays out a tax-free sum. If you survive to the end of the term, the policy is finished and has no residual value whatsoever. It only has a value if there is a claim – in that context it’s just like your car insurance!So Term Insurance is a Life Insurance product. Read more of this post

Legacy Drawer


wealthymaters.comDave Ramsey talks of the Legacy Drawer.It’s a drawer that houses all of the important information your family needs in case something happens to you.It might be the last gift you will give your family, so it’s worthwhile making it a good one.

The drawer should be somewhere in your home and contain everything your spouse or family needs to know if you aren’t around—anything that has to do with your financial life should be in that drawer. You must organize it in a way that anyone can find a specific document in 30 seconds. All files should be clearly marked, in order, and easy for a grieving family member to find. There’s no need to go into extreme detail when creating your Legacy Drawer. Simply include the appropriate documents in an easy-to-understand format, and you’re good to go!

Here is a list of things your Legacy Drawer should contain :- Read more of this post

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