Before Buying a Life Insurance

Things to keep in mind before Buying a Life Insurance

This article is all about the things that you should keep in mind before buying a Life Insurance cover. You should consider the following things in your mind before buying a Life Insurance Policy.

- How Much? -

Ask your self a simple question. How much your nominee will need to maintain the same level of life style in your absence? This amount should be your Life Insurance Cover.

- Cover the Housing Loan -

You should at least cover that Housing Loan. You need a life cover for an equivalent amount. This is because even if in your absence, your  family members can fulfill your housing loan and live in the same home.

- Consider Inflation -

If your family’s monthly expense is Rs.40,000 than in your absence, they will need Rs.1 Crore of Corpus to generate Rs.40,000 every month at the rate of 5% p.a. post-tax safely. And not only this but just after 10 years because of the Inflation, this monthly expense will be doubled because of the inflation.

- Human Life Value Method -

Human life value method considers your earning potential across your lifespan duly discounted at current levels to determine the insurance cover you need.

- Never go for ULIPs -

ULIPs is the combination of Insurance + Investment. ULIPs are nothing but the opaque mutual funds. They will charge you anywhere between 10-20% administrative charges. So rather than that, go for Term Life Insurance Policy & Equity Diversified Mutual Funds. But never Mix Insurance with Investments.

So keep in mind all of the above points before buying a Life Insurance Cover.