A life insurance policy is one of the most important financial products you will need to invest in. A life policy will ensure that your family is provided for, should any unfortunate circumstance befall you. This coverage will provide a lump sum payout to your loved ones who are nominated as beneficiaries and allow them to continue to maintain their standard of living, education for children, should anything happened to you without worries.
Yet, the wide range of policies out there might leave you wondering – which is the best life insurance for me and my family? Now, while it is next to impossible to select a single plan as the top choice for all, there are some points that should be universally kept in mind by parents when buying life insurance. Let’s look at 5 such tips that will truly come in handy when picking a life policy.
1. Decide how much coverage you need
As a parent, it is quite likely that you will have at least a few loans, such as housing loan, education loan, etc. One of your biggest responsibilities is probably repaying your mortgage. Before choosing a life insurance policy, make sure to do a calculation of the total debt you are currently in. Doing this will help you understand how much coverage required to pay off this debt while also leaving behind a sufficient corpus for your family to live comfortably on in the future. This calculation is imperative to ensure you do not end up underinsured.
2. Look for lifetime bonuses
It is a common misconception that a life insurance policy only offers payouts on the policyholder’s passing. However, these days, life policies are holistically designed to offer multiple benefits during the policyholder’s lifetime. For instance, if you opt for participating whole life insurance, you can benefit from the policy through bonuses that are based on the performance of the participating funds. Some plans even offer maturity benefits – this means that they will provide you with a lump sum amount when the tenure of the policy comes to an end.
3. Consider the benefits of riders
When buying a life insurance policy, you must consider adding suitable riders that can raise your coverage. For instance, certain riders allow your policy premiums to be waived off if you are diagnosed with early or intermediate stage medical conditions or disabilities. You can also add a rider that offers coverage for certain health conditions that may impact your child, including ADHD and Autism.
4. Understand the different types of life insurance
While the fine print of policies may differ between providers, life insurance can be broadly divided into two types – term life insurance and whole life insurance. Term life plans are valid for a fixed period whereas whole life plans extend for the entirety of the policyholder’s life. Some term plans can provide cover for your whole life too, it’s just that there is no payout unless the policyholder passes away. Whole of life plans on the other hand can maturity benefits. Alternatively, they can also be surrendered or terminated to recover some monetary value. Besides for these differences, both term & whole of life plans have their own unique benefits. So, do discuss the options with your insurance provider and decide which one is the best for you.
5. Factor in college costs
As a parent, you would want to start planning early for your children’s higher education. Yet, if unfortunate circumstances happen and affect your income, your children’s college education plan should not be disrupted. When the breadwinner of the family suddenly passed on or is suddenly diagnosed with a critical illness or total permanent disability, the family income may take a huge hit. In such a situation, the insurance policy steps in to help meet financial obligations, Therefore, it is important to ensure the coverage will suffice to meet the costs of further studies.
This is an overview of what every parent should keep in mind when choosing the appropriate life insurance policy. Do remember to explore all available options and compare policies before taking your pick. Discuss with your spouse and make the right choice for your family.