there are many questions and queries related to something we are not aware of. We might feel apprehensive and worried about exploring the unchartered territory where our money is concerned.
This concern and the need and desire to accumulate wealth over a period of time makes us ask a lot of questions to address our concerns.
We at Smartchoice have compiled the most significant and frequently asked questions by the people interested in investing in the life insurance policy. The investment can be made for multiple reasons, children education, marriage funds, post-retirement uninterrupted income and many other goals that may vary from individual to individual.
FAQs are as Followed:
Q: What features need to be checked before Buying an Investment Plan?
One of the most important things to ask yourself is that where are you investing: You need to understand and be sure about the place you are investing and how much risk is involved which is again proportional to your risk appetite.
When putting your money somewhere look for complete transparency and clarity, find the investment plans that are entirely transparent and clear.
When investing look and study past performance, the primary objective of investing is to increase returns on the money invested. To do so, you must check past performance report and analysis of the funds where you plan to invest your money. This will aid you to know how much returns can be expected on the money. As per your investment funds and appetite, you can look at their long-term or short-term performance report
How much fee is your investment expert charging you, well you may be charged a nominal amount as a commission to manage your investment portfolio. So you must check and be sure about how much you are being charged just to ensure you are not overcharged. And if yes, why!
Invest with a reputed investment company and know your fund house, one thing that is extremely important is knowing how reputed or well-known is your fund house. As you lay your trust in the investment management company it is essential to know about their claim settlement proportion. And more, you are investing your hard-earned money to them utilize on your behalf and to the best of their knowledge and understanding; it is pertinent to know your investment company.
Q: What are the things that you should know before Investment Planning?
1. The one thing to know before investment panning is knowing your Dependents. This is one of the most significant factors to consider before investment planning. Determine and decide the number of dependents in your family who you intend to cover under a certain plan for instance spouse, children, parents, in-laws, etc.
2. Set clear Financial Goals, this will help you define the amount of investment essential to achieve the predetermined goals. Have clarity that whether you have long or short term goals. For instance short term goals can be like buying a new car while long term goals might include children’s higher education, marriage, post-retirement income.
3. Understanding your current and future Liabilities is important as this will help you conclude the sum of investment which has to be devoted towards the desired investment plan without compromising on your present lifestyle and standard of living.
4. Choose the right Insurance cover to ensure that you purchase an all-inclusive insurance plan which offers a high sum assured. This will ensure that all financial goals are taken care off even in the case of your absence.
5. Realize your Debts and make sure that you calculate the investment money after deduction of any loans/instalments. It is logical to analyze your ability to take on additional debts, and you should only invest in them only when you are completely sure of your ability to pay them back within their due dates.
6.It is important to find a source for alternate Income for your family so opt for a life cover that will provide financial sustenance you and your family, in case of any grave unforeseen occurrences and accidents that can result in complete or partial disability or even death in case of an accident.
7. You need to find an additional source of income, one thing to do that is to always divide your investment amount into different/multiple policies. One part of the investment amount should be invested in life insurance plans while the other half of the investment amount into pure investment plans.
8. What is the set premium amount, the premium amount is the amount which you have to pay towards the insurance plan. You can decide on a suitable premium with the help of a premium calculator. There are online premium calculators available on the websites of multiple investment companies to provide investors with the convenience of getting free best quotes this facility is also available with smartchoice where you can compare quotes of investment provider against another.
Should I compare plans before buying Investment Plans?
1. Cover/coverage – It is logical to compare multiple insurance investment plans across different insurance providers. This will help you decide the suitable premium and the suitable insurance provider within your budget.
2. Riders/Additional Coverage – Riders (supplement covers) are an excellent possibility to enhance the coverage of your existing insurance/investment plan. You should only add those additional covers that you know about and their features and benefits opt for only the ones that are suitable for your unique needs and requirements.
3. Premium – Choose the premium total which is most suitable to your financial circumstances.
4. Increase/Decrease Premium – choose a plan which comes with the feature/option to decrease/increase your premium amount during the policy term. This feature allows you the convenience of starting with a lower coverage premium and gradually increasing the premium amount as per your rising annual income.
5. Payout Type – There are some investment plans that offer payouts on regular intervals, some plans others offer a one-time payout, while still, other insurance providers offer a mix of both. Choose wisely the option that best suits your purpose of investment and capital multiplication.
6. Returns – The returns on the investment plans depend on the types of funds which comprise the insurance plan. Funds can be equity, dues or hybrid based. Equity mutual funds are usually the best option for investors looking for high returns on their investment within a short period of time. Hence, they are best suited for people with high-risk appetite.
7. Alternative (more than one) Insurance Plans – one investment plan may not be adequate to meet multiple goals and objectives for the future and secure the financial needs of a family. Decide on a second plan which will act as a reserve in case the primary plan fails to provide a settlement.
what are the additional/Riders Investment Plans ?
As an investor of life insurance investment plan can choose supplementary covers. As the investment plans also cartels death risk coverage, optional coverage under such policy is available with the insurance policy. Additional riders magnify the policy coverage. In accumulation to the simple sum assured, rider benefits are also paid to the insured.
• One of the important riders is accidental Death coverage: If the policyholder passes away the accidental death, the insurance provider will pay the policyholder sum assured initially plus the supplementary benefit to the beneficiary.
• Accidental & Permanent Disability benefit: If the policyholder undergoes permanent disability due to the accident, the insurance company gives the additional benefit to the insured individual.
• Critical Illness Rider: Upon diagnosis of any major critical illnesses such as heart attack, cancer, stroke, kidney failure, paralysis, coma, the insurance company pays the additional critical illness benefit.
• Waiver of Premium: In case of a vanilla term insurance, if the insured individual suffers any incapacity because of which it is unable to pay future premiums, the policy terminates by itself.
• Accelerated Death Benefit cover: upon diagnosis with a terminal illness that may result in death, such as Cancer, Leukemia. AIDS, Ebola, the insurance company pays a part of the sum assured in advance to the individual and the rest is paid to the nominee.
Are my premiums for life insurance policy tax deductible?
The premiums you pay for your life insurance policy are nontaxable. And you will need to work with your insurer to restore your coverage.
Does a beneficiary need to do anything to receive the death benefit?
In principle, a beneficiary does not have to do anything to receive the policy’s death benefit, but it’s a great idea to make sure he or she (beneficiary) is aware that the policy exists in case there are any delays or complications on the insurance provider side. The underwriter will require proof of death of the insured and a copy of the agreement in order to pay out the benefit.
When is the best time to buy life insurance?
The best time to buy life insurance is prominently based on your needs. While it’s correct that the younger you are, the less you have to pay for life insurance, you should only buy it once you’ve decided that there’s a need for it (for example, once you have started a family)
What does the number of years attached to a policy mean?
The years attached to a policy means 10, 20, or 30 indicates how long the policy will be active before it terminates, also known as the period of your life insurance. Your life insurance is active as soon as you return the signed paperwork with your first premium payment and it lasts until the end of the policy period.
Can I pay for life insurance with a credit card?
With regret, you can’t use a credit card to pay for your periodic premiums at most life insurance companies. Most insurers will let you pay your premium with a cross cheque in favour of the company, and you’ll have to use a check or electronic funds transfer for all your life insurance premium payments.
What is underwriting?
Underwriting is the process by which the insurance provider determines the risk of insuring you. An underwriter will use life insurance tables and calculators and other risk calculation tools to calculate the price of the insurance policy so that it lessens the risk to the insurer while still remaining competitively priced with other providers and gives maximum benefit to the individual.
Are all life insurance companies the same?
All life insurance companies are not the same. They differ in the level of customer service and in the variety of insurance products they sell; they can also differ in the entry age and the percentage of returns etc.
Even when two insurers offer what give the impression to be the same basic policy, each one may have different underwriting guidelines that lead to different prices. You should always do a comparison while buying a life insurance policy.
What is a death benefit?
The death benefit is the total of money that a life insurance policy pays to the recipient upon the death of the policyholder. It is mostly untaxed and paid in a single lump sum.
How quickly do insurers pay out the death benefit?
After you file your claim, the insurer could pay out the death benefit in as little as few as five days or as many as 45 days. If you can’t find the paperwork verifying the claim or the manner of death is suspicious, there may be delays.
Who Can I Designate a Beneficiary?
You can allocate anyone to be your beneficiary. If you choose, you can have an individual, numerous people, a charity of your choice, a trustee, or your estate listed as your recipient. In the event that you don’t have a beneficiary listed, any death benefits paid out will go to your automatically selected benefactor. If you are going to select a beneficiary, it is important to remember that you need to be clear about who receives the benefit and what proportion he or she will receive.
How Much Life Insurance Should I Purchase?
Gather all of your financial information and begin sorting through what expenses may remain once you are gone. For those who do not have family or dependents to care for, an insurance policy that covers the funeral expenses is adequate. For those with family and dependents, it is important to calculate all of the expenses that you will be leaving behind and the expenses of your dependents.
Can I Buy Policies for More Than One Person?
Joint or group policies are obtainable for those who want to have one plan that will cover more than one individual. As with standard single policies, working with an insurance agent is the best way to establish what needs to be done upon the cashing of the policy.