How to save yourself from choosing a bad Life Insurance?
Eight CRUCIAL factors to consider
“Women are natural savers and investors; it’s time we unleash their financial potential.”
W: Welcome Story
Sarah, a 31-year-old engineer, lives with her daughter and husband. Besides her work and her hobbies, she truly cherishes her time with her family—they are the centre of her universe.
With her family being this important, she was always deeply concerned about their future. She kept speaking about this to her friends, who suggested her to secure herself by taking a life insurance cover, just to be free from this concern.
At first, Sarah believed taking a life insurance was unnecessary. She thought, “Nothing bad will happen to me, so why should I even worry about this?”
But the peer pressure and her friends’ suggestions made her purchase a policy.
Three years later…
One stormy night, Sarah met with an accident, leaving her injured and hospitalized.
The thoughts of her family’s future clouded her mind during her time at the hospital. The accident made her realise that life can take unexpected turns, and being prepared was better than suffering the consequences of not having a safety net.
Post her recovery, she found solace in knowing that her family’s financial future was safeguarded by life insurance if things turned out otherwise.
If we have to explain Life Insurance in the simplest way:
Life insurance is a contract between you and an insurance company.
You pay regular payments (premiums), and in exchange, the company promises to pay a sum of money to your loved ones after you pass away. It offers financial protection and support for your family when you're no longer around.
“But Meeta, with many companies offering insurance policies, how do we decide what suits us the best?”
Although the answer depends on various factors, let us give you the most important elements to consider to ensure that you don’t purchase a bad life insurance policy.
8 factors to consider before you secure a Life Insurance Policy:
Coverage Amount: Determine the amount you need based on your financial responsibilities, like paying off debts, supporting your family's future expenses, or covering other financial obligations.
A good rule of thumb is to have coverage worth at least 5-10 times your annual income.
Policy Term: Decide on the length of the insurance coverage you require. Longer terms provide coverage for a more extended period, but they might cost more. Choose a term that aligns with your financial goals and when you expect your dependents to be financially independent.
Premium Affordability: Choose a premium that comfortably fits your budget, so you can maintain the policy over the long term without straining your finances.
Types of Policies: Understand the different types of life insurance policies available. There are primarily two types:
Term Life Insurance: Provides coverage for a specific period (e.g., 10, 20, or 30 years). If you pass away during the policy term, the dependents receive the death benefit. It's generally more affordable and straightforward.
Whole Life Insurance or Endowment Policies: Provides coverage for your entire life and includes a savings component. Premiums are higher than term policies, but they accumulate cash value over time, which you can borrow against or withdraw.
Riders or Add-ons: Some policies offer additional benefits called riders that you can add to customize your coverage. Examples include critical illness riders, accidental death riders, or disability riders.
Claim Settlement Ratio: Check the insurance company's claim settlement ratio. It indicates the percentage of claims they have paid against the total claims received. Choose policies with higher ratios—It suggests reliability.
Reputation and Customer Service: Research the reputation and customer service of the insurance company. Life Insurance is a long-term game. It would be wise to choose policies from brands that you believe will sustain long.
Exclusions and Limitations: Understand which situations or events are not covered by the policy. Be aware of any specific scenarios where the insurance won't pay out.
A: Actionable Steps
Assess the family's financial needs and future goals.
Research reputable insurance providers and compare policies.
Seek professional advice to customize coverage for optimal protection. Talk to people who have purchased life insurance before.
Understand policy terms, coverage limits, and exclusions thoroughly.
Review and update the policy periodically to adapt to changing circumstances.
Your path to Financial Independence in just three months:
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A few highlights (you'll ace these after the course):
Clear understanding of key financial terms
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Moolah’s Courses on Insurance
If you want to learn comprehensively about life insurance, we got a perfect pick for you!
Life Insurance Masterclass
If you have no idea about how life insurance works, this is the course you’ve been waiting for. It is best suited for beginners and covers all the basic questions you might have about life insurance.
It’s simple, jargon-free, and explains everything in 60 minutes.
T: Thought Leadership
"Life insurance is a love letter written in dollars."
- Norman M. Cohen
Norman M. Cohen explains life insurance is a tangible expression of care and consideration for one’s family.
By purchasing a life insurance policy, you demonstrate your concern, ensuring your loved ones are financial secure even after your death. It provides a valuable safety net to protect those left behind.
Free Moolah Webinar:
“Our emotions can get in the way or get us on the way.”
Handling our emotions properly is extremely important as it helps us increase our productivity and our overall well-being.
Join us to learn “How to handle our emotions.”
Our guest speaker Ms. Gauri Aggarwal, a Certified Soft skills trainer will share her expert understanding on
Identifying feelings of anger, guilt, shame, and procrastination and learning to manage them.
Overcoming Resistance to achieve your goals.
How to be assertive and not aggressive in unfavorable situations.
Followed by Q&As.
Discover the power of emotions in this Moolah Webinar!
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Date: Sunday 20th August 2023, 6:30-7:30 pm IST
Monthly Q&A session:
Meeta answers all your finance questions on the third Friday of every month. Use this link to register for the session and get your queries cleared!
Date: Friday 18th August 2023, 6:30-7:30 pm IST
That’s all we have with today’s issue. We’ll see you again in fourteen days.