Buying a life insurance plan is not an easy task. One must have basic knowledge before buying a life insurance plan or before investing your money because it provides financial security to your family and loved ones. There are several types of policies available in the market depending on funds, plans, situation, etc.
It is very important to choose the best life insurance policy after looking at all the aspects, so here we are with 5 things to consider before buying Life insurance. You will get all the basic ideas to shop for the best life insurance plan for your loved ones.
Calculate your Insurance Need
you must know how much insurance do you need? if your insurance agent is a really very good marketing guy then he will definitely convince you to have at least 10 crores of life insurance plans.
Do you really need that much of an insurance plan?
to know how much of a life insurance plan do I need, you need to calculate the premium with these simple steps.
Step 1: take your annual income
Step 2: multiply it by 5
that much must be the life insurance plan one much go within my case consider that my annual income is 1 crore and multiplying it by 5 it would by 5 crores so I must have at least of 5 crores of cover.
Second thing, if you wanna go into complicated stuff then there is one more way called a human life value. in human life value, you calculate your current income and use CAGR through which you will be able to calculate your future earnings.
once you have all idea about your future earnings then you would again discount it to the current date and that would be the value of your life insurance cover.
Not the rider which you are thinking. rider means somethings which is like an add-on. you might get the question of what is an add-on? let us learn through an example.
when you visit mc Donald's and say I want extra cheese or sausage or whatever. in this case, extra cheese is added-on in the same way you can also have an add-on to your insurance policy.
for example, you may say that I want a pandemic cover, death due to fatal accident, etc. so these could be multiple things that you can add to your life insurance policy and these add-ons are nothings but Riders.
Here are some of the common life insurance riders:
• Accidental Death rider
• Guaranteed Insurability Rider
• Waiver of Premium Rider
• Death Benefit Rider
• Child Term Rider
• Family Income Benefit Rider
• Long Term Care Rider