Life insurance is a policy where a sum of money pays after the death of an insured person or a fixed period by the insurance company. Some financial advisors said that Insurance is not an investment. There are far better options are available for investing your hard-earned money to get outstanding returns.
Life insurance policy is the great one that covers your liabilities. This is used as a replacement for economic loss for your dependents in the case when something happens to you. Often life insurance is sold out as a tool for retirement savings or education saving but this is not the actual purpose of it. If you want retirement or education saving, then you can prefer some other wonderful plans, not this one.
We will know why experienced financial experts give this important statement against the insurance companies. Though, almost every insurance company sell their life insurance products to the buyers by convincing them that it is a great investment policy for them. Let’s know whether life insurance is a good or bad insurance idea.
The main purpose of signing on the paper of insurance by a buyer with the insurance company is to recover the financial loss. Life insurance comes in two major forms i.e. Term life insurance and permanent life insurance. It has several other forms that cater to people in various age groups along with numerous financial goals.
There is no doubt that life insurance is amazing policies to mitigate the risk caused due to the accidental death of earning members of a family. But life insurance is beneficial in some cases but can’t be an investment. Here read all about Life insurance. And, here you would get to know each and everything about Life insurance. Let’s continue to read and know the detail of it along with the conclusion that whether it is a good investment or worse.
Now first know what is two major kinds of insurance such as permanent and term life insurance-
- Permanent life insurance
- Term life insurance
Permanent life insurance
Permanent insurance covers both cash saving and death benefits. It also has some types such as-
- Universal life insurance: In universal life insurance, premiums, savings, and death benefit are adjustable. It is more affordable and somewhat similar to the term life policy.
- Variable-universal life insurance: In this type of insurance policy, death benefits and cash value are offered but premiums can vary.
- Whole life insurance: In this kind of insurance policy, you get the coverage for life that includes death benefits, cash value, and guaranteed premiums.
When you would buy life insurance products, then you would see different kinds of options. Choose the plan according to your actual requirements.
Term life insurance
It is a kind of insurance policy that guarantees payment of stated death benefits. Term life insurance expires after a specific term of time. To avail of the benefits, the policyholder has to renew it for another term. It is the choice of the policyholder whether he/she wants to continue the policy, terminate the policy or want to convert that into the permanent coverage after ending of one term.
Term life insurance policy is of 3 types such as:
- Level-premium policy: In it, the major period of the policy is from 10 to 30 years. It includes both premium and death benefit. In this, premium is comparatively high than other types of the term life insurance policy.
- Yearly Renewable term policy: You need to renew your term policy every year in this that even without evidence of insurability. In it, premiums are low initially but it increases as the insured ages. It is not a much-liked policy.
- Decreasing term policy: It declines every year and policyholder pays a fixed premium for the predefined duration.
Why need life insurance?
Life insurance is an ideal way to provide financial protection or support to the dependent of the insured person after his/her death. One needs to analyse the standard of living and financial situation of the family and should sign on the life insurance policy according to that.
First, have the benefits of Life insurance to the insured person-
Life insurance products offer fixed money to the insured person’s family if in case he/she dies during the term of the policy. In case of disability due to accident or other mis-happenings to the insured person, life insurance provides definite money. It provides financial support to your loved ones after you.
Life insurance policy is a great way to pay off any kind of debt on your family. Whether it is debts of credit cards, vehicle load, mortgage, and others. This also reduces the funeral expenses of your family.
- Provide financial help to support dependents
- Pay off all kind of debts
- Surety of investment return
- Fixed premiums
- Builds cash value that can be withdrawn before death
Let’s clear you up that why experienced people don’t understand life insurance investment. Have a look at the cons of the Life insurance policy-
- Cost is too high
When it’s about to consider the whole life insurance, the cost is too much. Especially for young people because paying the insurance money their whole life would be too much for them. Like this, they have to invest a large sum of money.
- Complex deal
Life insurance policy is so complicated that even the guys who are selling don’t understand the policy completely. They only understand the commission structure. Only the actuaries of the companies able to figure out the whole policy. The more complicated a policy, the more it is the bad deal for you.
- A way too long process
Whole life insurance policies are really a long process. Only the benefits of these policies can be avail after the death of the insured person. It is a really long process that only profitable for the family of the insured person.
After reading the whole blog, it is clear that it is good to have a life insurance policy to provide financial support to your dependents when you would die. Saying that it is a great investment would be wrong. It can’t be a great investment. So, just think for a moment before buying the life insurance products. If you think that there are any serious health and other financial issues with you, then opt the policy otherwise for the great investment choose other attractive plans. There are several investment plans available for you if you want to get guaranteed great results.