The article gives few tips to purchase effective life insurance policy:
Your Needs: Identify your needs both short & long term separately would be the first step for your purchase. Different needs have different set of financial tools. While an endowment plans will save funds for particular needs like buying car or house, retirement plan will look after steady income post retirement.
Review Needs: You may have bought a policy before being married to accomplish your financial goals like owning car, buying house, looking after parents etc. But once you marry responsibilities change, children will be born so it is imperative to carefully evaluate and review your insurance policies periodically to ensure that they are in accordance to your requirements. It is advisable to opt for suitable term plan if you’re settled with a family so that you ensure financial stability when you’re no longer there to support them.
Invest till Maturity: Insurance policies are designed to give maximum benefits. Polices like endowment, whole life policy, ULIPs are designed with a purpose to offer end results to customers. These policies give dual advantages of insurance investment and generate maximum returns. So, have patience and wait till the maturity if you want to earn the fruitful returns on insurance policy. Also, you should start investing from younger days to enjoy the compounding effect of your policy.
Disciplinary Approach: Your policies are not informal investing like saving in piggy banks. If you can’t make this week then you leave it. You should regularly pay your insurance premium to keep the policy active else it might get lapse, purged or shorten your cover.
Riders: Riders such as premium waiver benefit and critical illness, give additional protection to financial needs by customizing the policy as per your requirements. You can choose them as per your convenience and needs. Some choose them at the time of purchasing the policy while others can go for purchase later on to expand your insurance coverage.
Tax Benefits:Life insurance policies can be useful tax planning tools as the policy holder is eligible for tax benefits under the Income Tax Act 1961 (Act). It is one of the most effective instruments to create your tax savings plan. With life insurance plans individuals can not only save tax but also look at achieving their long term goals. The good news is that you can now save upto 1.5 lakh amount of deduction under section 80C and 80CCC. Besides, the amount that you receive after maturity or claim is also tax free.
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