Spend, Save and Invest Smartly
Life insurance just like any other product is bought to meet a need. A term life insurance policy a pure insurance plan with no survival and investment benefits is widely regarded as the best life insurance you should have. A term life insurance policy might not suit your needs in some circumstances.
You are the best judge of your financial situation as only you know your financial needs and what you want to achieve with your money.
You definitely require a financial adviser to advice you on which life insurance policy you should take. The financial adviser advices you after thoroughly understanding your financial goals and the money you have at your disposal to achieve it.
Term life insurance policy is taken if you are just married or have young children. If you the policy holder die at a young age the sum assured is claimed by your nominee’s (Spouse and Children) to meet day to day expenses and loan liabilities.
You have a disabled child (Children with special needs).Then you don’t require a term life insurance policy. A term life insurance policy is taken across your working life and if you survive the term of the policy your nominee (wife and child) get nothing from this policy.
A whole life insurance policy covers you for your whole life. It is an investment cum insurance policy. The premiums for such a policy are paid as a single premium, for a 15-20 year term period or up to retirement or for the time you take the insurance policy (Term of the policy).This depends on the Whole life insurance policy you choose.
The maturity period of this policy is 40 years after the whole life insurance policy commences or up to the time you attain the age of 80 years (in some cases 100 years) whichever is later.
A child with special needs, takes a lot of care and incurs a huge expense. The proceeds from the Whole life insurance policy (Sum assured + Accrued Bonuses) on the death of you (The policy holder) or at maturity of the policy is transferred to your nominee. (Disabled Child or his guardian).
If you have a number of investments (Stocks, real estate, fixed deposits and so on) you can use a Whole life insurance policy as a tool for wealth transfer (Estate planning).The maturity amount (Sum assured + Bonuses accrued) can be transferred to your nominee after you (the policy holder’s) death.
Take a Whole life insurance policy at a young age (In your twenties).This means you pay a low premium and it remains constant for the time you have to pay it. Medical tests are conducted when you are young. You don’t have to keep taking medical tests when you are older.
Take a policy with rider benefits mainly an accidental rider (Pays the nominee the sum assured and a higher amount if the policyholder dies in an accident) or a critical illness rider which pays you (the policy holder) a lump sum for the treatment of a critical illness.
You’re past 50 years of age and are nearing retirement. You would have sufficient savings at your disposal and your children would be working. You have almost completed your working life and you no longer require a term life insurance policy. Your premiums would be an unnecessary expense.
You could take a Whole life insurance policy which matures when you are 80 years. If you live beyond 80 years the proceeds of a Whole life insurance policy can be used for your retirement years .( Retired life beyond 80 years).
You and your spouse are working and you have no dependents. You also have no loan liabilities. The money you and your spouse earn can easily be used for your retirement years. You also have a substantial amount of savings. You need to preserve your wealth from an unexpected critical illness. Medical bills can blow your savings away.
You and your spouse need a comprehensive family floater health insurance policy (with critical illness cover) to cover your medical bills rather than a term insurance policy.
The critical illness health policy provides you a lump sum to pay the medical expenses of a critical illness. (Cancer, stroke, heart attack).
Term life insurance policy is a pure insurance policy and is required if you have dependents (Family who depends on your income and would be financially affected in your absence).It has low premiums as there are no investment benefits .Even if you take a term life insurance policy when you have dependents (spouse and children) make sure you invest the savings in premium (By virtue of term insurance plans having low premiums) in a good investment.
The term life insurance policy would not be of much use compared to twin benefit policies such as an Endowment life insurance policy or a Whole life insurance policy (which have a high premiums ) if you spend the difference in premium rather than make a good investment. So avail a term life plan only if you need it.