Insurance
There cannot be a one size financial plan that fits all. Depending on one’s circumstances, income level, lifestyle and family, every person must plan for a customized financial planning. Life insurance is one such financial tool that offers customers the flexibility of a personalized design. Since each person has a different financial background and different family structure, these personalized insurance plans go a long way in creating the perfect protection for every individual. Let us take a look at some of the ways one can personalize his or her insurance plan.
Expand Life Insurance with Riders:
The first step towards getting a customized insurance plan is to seek various additional covers on your life insurance policy. Additional covers commonly known as insurance riders or simply add-ons which are sold along with the base policy. The riders allow users to customize their health and life insurance plans depending on their risks and circumstances suiting their specific needs.
Accidental death: An accidental death rider pays the nominee of the deceased an additional sum assured over and above the base policy in case of death during accident. For example, if one takes a policy of Rs 55 Lacs sum assured and an accidental death rider of Rs 20 Lacs along with it, his/her nominee will get Rs. 75 Lacs in case of the proposer’s death due to accident.
Waiver of premium: In case if the policy holder is unable to pay the premium of the insurance policy due to disability, critical illness or untimely death, the waiver of premium rider allows continuity of the base policy in the event of any such nonpayment.
Critical illness rider: Critical illness rider allows the person to avail a certain amount in the event if diagnosis of a critical illness during the term of the policy. The critical illness must be covered as per the rider of the underlying insurance company.
Income benefit rider: Income benefit rider allows the nominee of the insurance policy to receive 10% of the rider sum annually till the maturity of the policy in case of death of the policy holder during the policy term.
Rider for tax benefits: The additional cover or riders act as a useful tool for tax benefits under section 80c and section 80D of the income tax act. So one can plan his / her insurance based on tax benefit requirements.
Choose the Right Insurance Plan:
Choosing the right insurance plan is very critical. The process of customization of an insurance plan must begin at the stage of buying the right plan. Before selecting any insurance plan, it is critical to evaluate one’s financial position assessing the right quantum of insurance as per one’s financial position. Starting early is one of the best financial decisions one can make with respect to insurance. The earlier one buys a life cover, the cheaper it gets.
Let us consider an example of two couples investing for their child’s future. Let’s say first couple invests for their child’s higher education as soon as the kid is born while the other couple starts late when the child is 5 years old. Assuming both couples invest a minimum amount of Rs 5000 per month with a return of 12% per annum, after 20 years the first couple will have Rs 49.95 Lakh available while the second couple only Rs 25.23 Lakh.
A vast majority of people purchase insurance plans to save some tax. While insurance plans do offer tax benefits up to Rs 1 Lakh under section 80c of the income tax act, insurance must be considered in totality. From a tool of financial support in case of one’s demise to an investment tool for your children’s future education and your retirement benefits, all play an intrinsic role in selecting any insurance plan. Tax saving tool is an added incentive and should not be the prime reason to buy life insurance.
Compare various Term Life Insurance Plans at BankBazaar.com to get the best plan for you