Life Insurance

Life insurance can be termed as a contract between and insurance company and the person who is insured. A life insurance policy will protect any persons family against financial risk to the extent the life is covered/ sum assured of the life insurance policy in case of death of the life insured. Thus a life insurance policy is always meant for your family and not for you.

Why Life Insurance Is So Important ?

Life insurance is usually taken by the earning member(s) of the family to ensure that in case of their death, and hence their source of income ceasing to exist, the dependent family members would have a lump-sum amount to fall back on. So by paying a small amount every year the earning member of the family can ensure that the future of their loved ones is absolutely secure from a financial point of view. So in the event of death of an insured person, the nominee of the policy would receive an amount called the sum assured which can then be used effectively to plan for their future.

The source of income comes to an end but not the expenses.They remain, as they were earlier before the death of the breadwinner of the family. Just in case, the income doesn’t remain the same as earlier, the family has to downgrade their standard of living. This kind of situation may affect the future of the family drastically. To overcome all these risks, life insurance is mandatory for everyone who has any dependent on his or her income besides any kind of liability like a home loan or a personal loan or any other loan. In case of death of the insured, the money, which is received from the Life Insurance Company, is paid to the bank or the financial institution from where the loan is taken.

How Much Insurance Should One Take ?

To put that in simple words, the sum assured should be large enough to take care of your entire family expenses along with your liabilities if any and also should fulfill all the goals of your children’s future or buying a home for your family or any other goal you have. This is quite a sophisticated process and you should take professional help to know how much sum assured you need. Taking a lower sum assured than your requirement means that you are not adequately insured and in case of death, your family will have to make some kind of compromises either in regular expenses or for the goals you had set for your family.

In case you have taken reverse route, like going in for more  insurance than you need, implies that you are paying more premiums that is actually not needed.