What To Buy???

When it comes to choosing life insurance policy, the myriad of options available makes it difficult to know how to customise a policy to meet your specific needs. There is much more to a life insurance policy than simply choosing a term and amount, and often buyers are left wondering if they did the right thing.

Carelessness is certainly part of wrong decision making when it comes to choosing a suitable policy in life insurance. People are surprisingly eager to invest money without sheer knowledge of what they are doing. However, even those buyers who try to be diligent lack a decision making framework to be successful.

Here are a few ways that may help you to make informed decisions when it comes to choosing a life insurance policy. Every human being needs life insurance but the amount of insurance required and type of product completely varies from person to person.

Earlier consumers would usually buy insurance policies because of the fear factor rather than understanding the advantages of it. Today’s scenario is completely different – life insurance is for you if – you die early or you live too long. It is essential that one understands the product thats/ he buys, especially, if it is of a long term nature. In most cases the nominee gets the benefits of the insurance post the death of the policy holder.

The best way of buying a life insurance policy is by sitting with your advisor and working out on “need analysis” for yourself. It is important to note that the need analysis is based on your disclosures of your income, expenses, liabilities, assets, responsibilities and obligations. If the information provided in the need analysis are incorrect, manipulated or distorted then the resultant inference of the same would not be the right one and you may land up taking a wrong plan.

Generally it is seen that the person has the following insurance needs:
* Protection needs
* Savings needs
* Investments needs
* Pension and annuities needs

Once the needs are clearly identified, it may or may not be possible to fulfill all the needs at that point of time. But it is very important that one identifies the same and is fully aware of the needs. Then based on your net investible surplus that is available at that time, either one or combination of products can be considered as to meet specific needs that are identified.

It is also recommended that the need analysis be done on a yearly basis as most of the parameters tend to change over time. The current avenues available for the policy holder for investments are banks and banking products, post office investment, mutual fund, direct investment into equity and debt instruments, investment in real estate, gold etc. While doing any investment one must ensure the three financial needs.

Immediate need: The need that would take care of immediate requirement for discharging all liabilities and commitments, even if s/he is not there.

Collective needs: These are the needs of a person which do not come with pre-warning. These are those for which a person never does any budgeting from monthly savings.

Retrial needs: This is basically to build up capital which would take care of post retirement needs.
However, designing life insurance policy or a combination of various plans would be definite solution for the same. The plans can be customised to meet ones specific needs and most importantly made available according to ones net investable surplus.

One thing to be kept in mind is that buying the right life insurance plan is an art and must be done scientifically with full understanding.