A life insurance plan is an important need that provides financial security for your loved one and it also another way of investing in the market. Moreover, It also helps to save taxes.
That is why one must consider the following points before buying the life insurance plan.
The signing of a blank proposal form
Before opting for a life insurance policy, make sure that you have properly read all the details in the proposal form, and never make a mistake of signing a blank proposal form. Make sure that you have received a document copy after going through all the details. One can easily withdraw back the policy during the duration of free look – in the period.
Select the appropriate life insurance plan
There are 2 kinds of life insurance. The one which provides after death benefits and other which provides death along with survival/maturity benefits. It all depends on whether you see a life insurance plan as a risk management investment or tool.
After taking the insurance policy, the insured gets a fixed assured sum or cover after the maturity of the policy or sudden demise of the insured. It is a thumb rule of life insurance policy that is should cover 10 times the annual income of the insured. For example, if any person has an annual income of 9 lakhs then the person should go for the policy that covers at least 10 times that of his annual income i.e. 90 lakhs.
Discontinuing Policy or Surrendering Policy
The choice that a person makes between the two wholly depends on the type of policy purchased.
Surrender policy provides the benefits even before the policy is matured. This is expensive because one could mislay the considerable benefits of the policy.
Alternatively, the term plans do not have any surrender values. The insurer has the option to stop making premium payments as and when he realized that he does not require life insurance.
Generally, life insurance plans are purchased so that insured can claim for tax deductions under Section 80 C of the Income Tax Act on the premium paid. As well as, the maturity amount is also exempted from tax under Section 10 10D of the Income Tax Act,1960. One should buy insurance for security and not only for the tax benefits.
There are different prices for every plan which includes mortality charges, premium allocation charges, policy administration charges, fund management charges, etc., and these charges are revealed in the brochure. The traditional plans such as money back and endowment plans do not reveal the prices and the agents/distributors get the maximum commission in these plans.
Therefore it is advisable before opting life insurance policy, one must go through all the information and consider asking such questions before buying life insurance.