Insure yourself wisely!

By | April 22, 2011

Earlier it was believed that, insurance policies were needed so as to protect your family, if you as a policy holder, enter into a critical illness, or worst case, die, the family could be benefited from the proceedings.

But, these days due to increased regulation, there are a lot of schemes that have come in to the market, which makes it difficult for the policy holder to choose. And apart from providing the sum assured to your dependents, availing a life cover has the following benefits:

 

  • Provides risk cover

 

  • It is an investment

 

  • It is a tax saver.

 

In order to fully utilize these options, one must be wise and not get into the advertisements of the policies, and blindly choose the plan. Approach an agent and try to get a clear picture of what policy might benefit you keeping your financial earnings in mind.

Life insurance policies apart from the above said advantages have also the ability to clear out your outstanding loan amounts, if any. For example if you have a home loan, taking a home loan insurance will insure your home and finance the outstanding  amount if you are unable to pay it during an event of the accident or death.

But, it is not prudent if you take numerous life insurance covers just to benefit from tax savings. In that situation, although your money is being invested, you might not generate more returns which you otherwise could have by investing in other options.

Remember an insurance policy requires a long-term commitment, unlike an investment in the PPF, NSC or even in ELSS funds. If you have a term cover or an Ulip and are not satisfied by its performance, you can take the following steps:

 

  • Let the policies lapse so that you do not have to pay the premium. This is the easiest but costliest way out. You will lose the premium you paid till now.

 

  • Surrender the policies after paying the premium for three years. This also leads to losses because of the surrender charges levied.

 

  • Turn the policies into paid-up plans.

 

The premium stops but the life cover continues. This is also possible only if three years’ premium has been paid. The money is not returned to the policyholder, but used to offer life cover to him for the rest of the term.

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