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Do you really understand what life insurance is all about?

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Unexpected death can wreak havoc

The unpredictability and turmoil that death can bring about is nothing new. Unpaid bills and an uncertain future can rapidly replace happy security within a span of twenty four hours. The first burst of grief gives way to a genuine concern and worry about how the family will pull along without its chief breadwinner. You can count on people's assistance only up to a certain extent. Financial dependence and financial obligations are not possible to sustain over a prolonged period of time. Others will want to continue with their lives and even if they wished to, they may not be in a position to help you out. Therefore it becomes necessary to be better prepared for such an eventuality. It is best to do it professionally in a planned and organized manner.

The importance of a financial buffer

It is all very well to claim that money is not important to live a happy life but this logic goes out of the window when you face a situation where there might be no money coming in. Many things you took for granted no longer present that ease of purchase that they once represented. The most common situation where a person may be faced with this kind of predicament may be when the breadwinner loses his job or when he or she passes away. If it's only a loss of job, another job will come along at some point, but what you do you with an inevitable event like death?

That is when the realization that money is a great back up will come home to you. Financial stability is required for acquiring the basic necessities of life (remember that you cannot even buy a needle for free) as well as for retaining your self-respect. It will take time to stand on your two feet and during that interim, you need something to fall back on. That something is only finance and nothing else. Only the certain availability of money will protect the family from ruin and despair. This money can be paid for and arranged from beforehand while the applicant is still alive. This is where the whole idea of life insurance comes in handy.

Thinking about life insurance

Since no-one likes to think about death; life insurance is not exactly a 'Eureka' concept that suddenly flashes across the subconscious. Opting for life insurance is a planned and informed decision that is made deliberately when one realizes that youth is not infallible.

It is difficult to get around to thinking about life insurance. Youth brings an inherent arrogance with it which dispels any fears about the future. Life seems like one happy dream and it's very hard to think along the lines that the dream might be over without warning. But yet, when young people earn and support their families, it is very important that they too opt to invest in life insurance. Earning family members of any age should consciously think about purchasing life insurance to protect their families.

How is life insurance defined?

Put in simple language without any complex legalese to create confusion, you could explain life insurance as a predefined contract between the applicant and the insurance company whereby the insurers agree to pay over a certain sum to the family if the principal applicant should pass away. This contract may be drawn up for life-time or may be drawn up for a smaller period of time. Understanding what the life insurance contract entails is very important because all policies are different and contain their own small print. They differ widely from one company to another. However there are basic things you should take care to understand clearly:

  • For what period are you insuring yourself for: Is it for the whole life or is it a particular period of time like ten or twenty years? When do you need to renew it?
  • How much are you willing to put aside as monthly payment or yearly payment towards your life insurance? Are you sure that this amount is enough to harness a substantial amount later? Can you afford to put aside a little more? Or is it too much for you to afford?
  • Have you opted for an insurance policy which also offers investment options on maturity? Is your money base expanding or the firm is unable to offer competitive rates of interest for your money? Remember that insurance companies also double as investment companies nowadays.
  • Have you thought about which policy would suit you best? There is a wide range of choice available to you and out of them you ought to pick the one that' suits you financially and offers the best value for your money. You can always upgrade your policy when you can afford it. Do not opt for the cheapest policy that you can find.
  • Have you have yourself medically examined-as this has a bearing on the insurance rate that will be offered to you.
  • Is there any small print that is making you uneasy? In that case, do not sign on until you have had your doubts clarified by a professional.
  • If you are covered by your workplace insurance, be careful that you avoid duplicating your insurance coverage. On the other hand, if you want to purchase your own policy from the company that insures you at work, you can do it al reduced rates.

So having thought about purchasing life insurance, the next step is to understand all the above issues that work as important inputs in the equation. The most two questions out of these are: How much is the premium? How much coverage is that premium going to provide your family with?

In the last analysis, only you as the applicant can decide on how much life insurance you want for your family. The fact that you want to invest in such a policy is an important first by itself.

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