Life Insurance – A first step towards financial planning

Being a professional with around 10 years of experience in life insurance industry, it will be embarrassing for me if I do not convince my readers about importance of life insurance.

Any financial planning is incomplete if the person who is earning bread and butter for the family does not have adequate life insurance. A person on whom the family is financially dependent should ensure that under all the circumstances (whether he is there in future or not), his dependents maintain the similar life style.

Here are few important tips for buying life insurance:

• As soon as a person starts earning, he or she should have insurance.
• The first and foremost product to buy is term insurance or pure death benefit product. The company charges for you for the insurance cover or guarantee provided on your life. This is the cheapest product available in the market.
• A person should have life insurance of 10 to 15 times of his annual income. While buying the insurance, a person should provision for future increase in income, additional family responsibility in terms of marriage or children, inflation resulting into increased cost of living etc.
• It is better to buy the insurance at early stage since the premium will be less than what you buy at later stage of your life.
• Tax incentive should be the last thing a person should bear in his mind while buying the insurance. Take the insurance for protecting the dependents. There are other avenues for doing tax planning and saving the tax.
• Now a day’s many companies are providing online insurance products. These products are cheaper compared to traditional way of buying the insurance since there is no cost of intermediatery. One must explore such kind of product before finalizing the plans.
• There are various types of product available in life insurance industry. Ensure that you buy the product which you require. Generally the sellers (agents or companies) will sell the product where they have more incentives. But be careful. Do not get carried away with false promises or greediness.
• Be honest. Provide all the correct details like your age, medical history etc during the application stage. If you lie, there are chances that your claim may be rejected.
• Share your insurance details with your family member or financial consultant or friends so that in case of unfortunate event, insurance company can be intimated.
• Before I end, let me remind my readers that insurance is for recovery of financial loss. It should not be considered as an avenue for earning the profit.

Author: CA Hemraj S. Joshi – [email protected]

Views are personal.