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Why do I need Insurance?
You need insurance for
Family that is financially dependent on you: If
you have a family that is financially dependent on
you, then you definitely need to insure yourself.
The most common reason to buy life insurance is it
provide protection to your family incase of any
unforeseen events. The life insurance proceeds can
be used to support your family members with the
expenses.
Loans or liabilities: It is very important to insure
yourself if you have taken a loan or mortgaged your
assets. It not only provides peace of mind but also
a steady source of income for your family
Compulsory saving-cum-investment: A life insurance
policy could be used as a compulsory
saving-cum-investment avenue. Proceeds from the
insurance policy could be used to fund future
expenses such as child�s higher education or
retirement funds or even a well-deserved holiday.
Partner in a firm or Self-employed: It is highly
needed by people who are partners in a firm or have
their own proprietor firms. Life insurance can be a
critical component for specialized business
applications - such as funding a buy-sell agreement.
The proceeds of a life insurance policy could be
used to provide cash for the purchase of a deceased
owner�s interest in the business or to pay off
business liabilities.
Other than the RBI Bonds, insurance products are the
only other investment products that guarantee yields
over a range of time - from 5 years to 25 years.
Insurance companies offer single premium investment
products as well as regular investment-cum-insurance
products that guarantee high yields over a period.
Loss of a life cannot be compensated for and this is
the basis of Life Insurance products. Other products
such as medical insurance would reimburse an
individual for an expense incurred by the respective
person in case of medical mishap. However, the value
of life of a person cannot be reimbursed and hence
all Life Insurance products work upon the basis of
paying an amount (also known as sum assured) in an
unfortunate incident of death based upon an initial
agreement between the insurer and the insured
person. The amount of premium paid by the insured
depends upon various factors such age, existing
medical ailments, lifestyle of the insured, duration
and amount of insurance. If the amount of insurance
requested by the insured is over a material amount,
the insurance provider may require a medical checkup
before entering into an agreement with the insured.
Amongst the types of life insurance products
available in the financial market, the most popular
options are Term Insurance and Endowment Policy.
In Term Insurance policy, the insured person
pays a regular insurance premium for the duration of
the insurance policy and if the insured dies during
the tenure of the policy, the lump sum amount / sum
assured is paid to the nominee / legal heir of the
insured. If such an event does not arise with the
policy term, no amount is paid by the insurance
company to the insured. In case of Endowment
Policy, similar to term insurance, the insured
person pays a regular insurance premium for the
duration of the insurance policy. During this
duration, the insured person is covered if a death
event occurs, whereby the sum assured amount is paid
by the insurance company to the nominee or the legal
heir of the insured person. However, if no such
event arises, the insured person is paid the sum
assured after the expiry of the policy tenure.
Several flavors of endowment policies exist where
such sum assured is paid throughout the policy
duration (in case of money back policies), or where
the insured pays insurance premiums for a specific
duration only and gets a life cover for an extended
period of time. Other policies invest a portion of
insurance premiums in stock markets and aim to
generate higher return and hence a higher maturity
payout (in case of Unit Linked Insurance Plans). In
summary Endowment Policy plans serve dual purpose of
providing insurance and acting as an investment
option in the same time.
In the maze of several types of insurance products
available through scores of insurance companies, BFA
assist their clients to obtain the right product to
suit their requirements.
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