There are numerous life insurance policies available. Here are some basic guidelines that can help you with your decision.
a) The right policy
While there is no universally correct policy, the right policy can be described as one that will provide you with adequate financial protection and is affordable.
b) Knowing your needs
Life insurance should be bought based on meeting your insurance needs. Few people can afford to buy all the insurance they desire immediately. It is therefore necessary to decide which insurance needs are of higher priority. Here are some of the common reasons for buying life insurance.
To provide income continuity in the event of death or disability
Even in a family with more than one income, the family will suffer a financial setback if one of the income earners dies. In the case of a family with only one breadwinner, the hardship will be severe. Similarly, if a person becomes totally and permanently disabled, he or she will not be able to continue working. In addition to loss of income, there will be a financial drain caused by the need to accommodate the condition. The family needs to be protected against such misfortune.
Life insurance provides financial protection for your dependents. It gives them cash to tide them over in difficult times. When buying life insurance for this purpose, you should look at the financial commitments of your family.
To provide income for the policyholder if he/she becomes critically ill
Should you be diagnosed with a critical illness, such as cancer, kidney failure or stroke, medical expenses will add up to a hefty amount.
Insurance can help with such expenses as a lump sum of cash will be paid to you once you are diagnosed with a critical illness. This money can help you with medical bills and other expenses arising from the critical illness.
To provide savings or investments
Life insurance is not just about sickness and death, it is also a good savings and investment tool.
You may be saving for a car or a condominium. You may want to go on a holiday or for further studies. Life insurance provides you with stable returns and helps you realise your dreams. It is also a good investment vehicle that can help you build a retirement nest egg.
To provide for your children's education
Education, especially tertiary education, has become increasingly expensive. Life insurance is one way to ensure that there are sufficient funds for your children's education. PRUlink education account, for example, efficiently facilitates this need.
Life insurance should be bought based on your financial needs. Few individuals can afford to buy all the insurance they desire immediately, so it is vital to decide which insurance needs are the most important. Generally, higher premiums will bring you more benefits. Thus, it is important to find the right balance between the amount paid and the amount insured for. You should buy policies which satisfactorily meet your insurance needs and which you can afford.