5 things to consider before investing in life insurance


For the long-term financial goal, it is essential to invest your money in investments that hold the potential for money growth. Long-term investments provide sufficient funds for goals at various milestones and stages of life such as the purchase of a house, higher education for children, and save for retirement to secure financial freedom. There are a plethora of investment options available for you like life insurance plans, mutual funds, pension plans, and real estate. Investments options are evaluated by your age, financial goals, and tolerance for risk.

Tips to Invest in Life Insurance:

Having a financial portfolio with a mix of investments is ideal for making your investment grow. Life Insurance plans are a financial product that gives a channel to save wealth for the future. The term of life insurance can be long or short depending on the insurance holder. Investment in life insurance can begin when an individual has a regular fixed income or a lump sum.

  • Types of Life Insurance

    The variety of life insurance plans offer a range of insurance benefits. When choosing a plan, it is essential to have clarity about the purpose and goal of the insurance. Also, it is necessary to know if the insurance policy meets your expectations. Knowing these will help investors in making a well-informed decision on the type of insurance that is best suited for them. The types of life insurance available are term insurance, whole life insurance, endowment policy, child plans, annuity plans, unit-linked insurance, and money back plans.

    Term insurance is a life insurance plans coverage for the duration of the life insurance policy. The whole life insurance policy covers the insured person and their family for a longer term. An endowment policy is an investment that is paid out after the period of insurance. Child insurance plan is for insurance holder’s kids. It will secure the child’s future with expenses like higher education, marriage, etc. Annuity plans help investors generate a regular income for life. The returns from the investments are paid out regularly. Money back plans are investments who pays back at regular intervals.

  • Premium Frequency

    Life insurance plans premium is a fixed amount paid for the period of the insurance policy. The most common life insurance plans have the following premium payments mode; monthly, quarterly, biannually and annually basis. Before choosing a premium amount, it is essential to decide on the amount that you can afford to pay. It is advised against overestimating the funds that you can afford to pay.

    Having a large premium payment will result in discontinuing the life insurance policy. The rate of premium paid depends on factors like the insurance holder’s age, marital status, health and the coverage provided by insurance. It is advised to pay dividends from your expenses fund and not your emergency fund.

  • Life Insurance Coverage

    It is ideal to purchase the most extensive life insurance coverage. But, it is essential for insurance holders to think over how much life insurance coverage you need according to your situation. The insured person should be aware that the coverage is dependent on the income of the family, coverage the family requires, and the premium you can pay.

    The life insurance coverage needs to be intuned with family requirements. This depends on the number of dependents, the income of the family, expenses like education, medical bills, and others. A good life insurance coverage comes at a high price. Therefore, if your family requires considerable insurance coverage, it is smart to invest in an insurance policy with a hefty price tag. The rule of thumb for life insurance coverage should be seven times the insurance holder’s annual income.

  • Choosing a Beneficiary

    This is the most critical step of buying life insurance plans. Usually, life insurance beneficiaries are the insurance holder’s spouse, children, or parents. Apart from family, the nomination for insurance policy beneficiary can be the legal guardian, an estate, your trust, a charity, or a business partner. An insurance policy can have multiple recipients. With various beneficiaries, each beneficiary can have a varying percentage of the insurance claim.

    There are two types of life insurance beneficiaries. They are the primary beneficiary and contingent beneficiary. The primary beneficiary is the person who gets the insurance claim amount. If this person dies before the death of the insured person, a contingent beneficiary is a secondary beneficiary who will receive the insurance amount if the primary beneficiary dies. It is vital for your life insurance plans nomination of primary beneficiary and a contingent beneficiary.

    Beneficiaries can be two classes — namely, revocable beneficiaries and irrevocable beneficiaries for your life insurance. Life insurance holder can change revocable beneficiaries. The life insurance holder cannot change irrevocable beneficiaries without the consent of the beneficiary.

    Over time, beneficiaries can change so the insurance policyholder should update the beneficiary every few years. Also, it is essential to keep up to date with the change in the insurance policy.

  • Insurance Claim Settlement

    The main responsibility of an insurance company is to the payout of the insurance claim. And the delivery of life insurance plans maturity claim to the beneficiaries. Before the purchase of an insurance policy, the insurance customer should look into the insurance company’s high settlement claim ratio. This can be checked on the IRDA’s website. This will ensure that the processing of an insurance claim is hassle-free.

Make sure to also look into the previous customers of the insurance company’s reviews. This will give you a firsthand experience on how the company is with settling the insurance claim. This will reduce your family’s stress at the time of your demise. If an insurance claim is rejected, look into the reasoning and the adverse selection possibility.

Before the purchase of life insurance plans, individuals should browse through various insurance plans. This will help you land on an insurance policy that will best suit you and your family. Once you have landed on the desired plan, look into various life insurance providers for the best policy, coverage, and price. Make sure not to make an impulse buy with life insurance. It is essential to make a well informed and detailed decision when it comes to life insurance. This is because life insurance covers and secures the future of your loved ones.


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