Life Insurance FAQ

Life Insurance FAQs

• What should I consider while purchasing a life insurance policy?
  You need to ensure that you get enough coverage. It is not wise to compromise on this front. The things you should consider for determining the coverage are your present income, your future earning capacity, number of dependents, your debts (like mortgages) and critical future needs (like the cost of children's education).
  
  
• What can life insurance be used for?
  Life insurance can be used for the following purposes:
  
  • To pay the deceased's last outstanding dues, such as medical bills and funeral expenses
  • To provide income for life to the spouse or income till the children complete their education
  • To pay for retirement
  • To pay off a mortgage
  • To cover taxes and expenses related to inheriting an estate
  • To pay for children's education
  • The interest can be withdrawn to finance some special purpose, like a wedding of a child
  
  
• How is the cost of life insurance determined?
  The cost of life insurance is calculated based on the following:
  
  • Mortality - The older you get, the higher is the premium due
  • Interest - The estimated interest that can be earned from investing the insurer's money by the insurance company into stocks, bonds, real estate and other investment tools.
  • Expense - This refers to the expenses of running the insurance company. This could include expenses such as salaries and legal fees. The amount charged by the insurance company is called expense loading, which varies depending on how efficiently the insurance company is managed.
  
  
• Should I buy life insurance through my employer?
  Well, there is no straightforward rule for this. The advantage of buying through your employer is that the life insurance becomes cheaper and less complex. The disadvantage is that the policy may not be customized to your specific needs.
  
  
• I am single. Do I need life insurance?
  Yes. Even if you are single, you could need life insurance. If you have a dependent parent or grandparent, you need a life insurance policy. You need one also if you have taken a joint loan or mortgage. Moreover, it is best to take a policy when you are young and healthy. So, it is not a good idea to wait till you get married or have children. If you have a family history of any condition, like heart disease, cancer and diabetes, you should consider taking a life insurance policy.