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Life Insurance - A Safety Net For Newly Weds
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You are all set to start a wonderful life together, a life which is full of opportunities and dreams waiting to be fulfilled. An insurance policy might be very low on your priorities of romance but it is imperative given the unforeseen future.
Why life insurance?
Life is uncertain. Rarely do the young think about death or believe that they can die. However, to ensure that your loved one doesn't have to worry about finances in the worst case scenario that you do meet your maker early, buy a modest amount of life insurance.
Financially speaking also this makes sense. When you buy at a young age the premium that needs to be paid is less. The premium amount for the same policy increases with age, so this is the right time to buy one.
How much insurance is enough insurance?
As a thumb rule an insurance cover of about ten times your income would be ideal. This would once again depend on your current lifestyle, your family status, the number of people you may have to support and your earnings.
What you should look at before buying insurance?
It depends on the purpose of the insurance policy.
- When you are looking for protection buy what you can afford. Ideally a Whole Life Assurance Policy is an ideal policy for longest protection.
- When insurance is an investment option study the returns on various schemes and take a decision.
Jeevan Saathi from LIC is an ideal policy for young working couples. It is a joint policy for working couples. ICICI Prudential's ICICI Prulife Time and ING-Vysya's Fulfilling Life policies are also good options. Jeevan Anand from LIC is a unique with-profits plan that combines the features of the Endowment and Whole Life Plan.
- When your income is not a fixed one, a good option would be a single premium policy. Here you pay a fixed sum for a period of three years. After a minimum period of seven years you can encash it with good returns. You could use this money to cater to big expenses like expansion of business at a later stage. LIC's Market Plus is a good policy in this category.
- Pension Plans. Invest in at least one good pension plan to ensure a steady income, post retirement. Jeevan Akshay and Jeevan Nidhi are pension plans from LIC.
- Some more insurance buying tips:
- Opt for endowment policies as they yield cumulative returns on maturity.
- Generally, you can expect a return of 5 to 8% on the various policies, which is tax-free, thereby enhancing the effective rate of return.
- The amount of returns will vary depending on the amount of the policy. Bonus is declared on most policies.
- As and when the family expands there should be a review of the existing policies. Fresh policies may be taken to provide for children's education and wedding.
- Many insurance companies like Maxlife and ING Vysya offer policies under automatic premium payment option, which ensures that plan does not lapse if premium could not be paid for some reasons. This is an especially good option for people with unsteady income.
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Geetha Dasarathy
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