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Are you looking for a Life Insurance? Six Tips for Buying Life Insurance

Are you looking for a Life Insurance? Wait bro, you should thing about some little things before buying life insurance. Here is some do and don't of life insurance.

When a car meets with an accident, the amount of damage can be estimated to be Rs. 50,000.The insurer will compensate the owner for this loss.
How do we estimate the amount of loss when a person dies?
Is he worth Rs. 50,000 or Rs. 5,00,000?

Before going to buy life insurance you should know about a term called H.L.V or Human Life Value. Look you can easily calculate the value of your household things, your car, but could you calculate your life value? Look insurance means protecting something from some unknown or unseen calamity. But what if you could not calculate how much you should protect..


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Read More 7 Reason Why Should a Person Need Life Insurance


H.L.V  is a vast chapter. But take it easy man, I am not going to teach you all. You are just buying an Insurance. So here is some tips-

1. There is a simple thumb rule or way to measure HLV. This is to divide the annual income a family would like to have, even if the bread earner was no longer alive, with the rate of interest that can be earned. Example- Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself.
The net earnings his family would lose, were he to die prematurely, would be Rs. 96,000 per year.
Suppose the rate of interest is 8% (expressed as 0.08).
HLV = 96000 / 0.08 = Rs. 12,00,000

2. Insurance is a tool for managing risk. But consider before opting for insurance that don't risk a lot for little.
A reasonable relationship must be there between the cost of transferring the risk and the value derived. For example would it make sense to take an insurance on a ordinary ball pen.
 
3. Consider the likely outcomes of the risk carefully: It is best to insure those assets for which the probability of occurrence (frequency) of a loss is low but the possible severity (impact), is high.
 
4. Don’t risk more than you can afford to lose. Suppose you are planning for a bulk amount, but you have to invest a lot for that. Now your earning is not matching with your planning. Now this planning is the cause of your headache. So bro please plan at your limit.
 

5. Next if you are planning for some definite goal, and investing in any endowment plan, because is the plan is fulfilling your particular goal.
 
6. Ask your financial adviser about some things- Is the plan linked or non linked, Is the return is guaranteed or not, Is this a ULIP plan or conventional plan.
 
So now feel free before buying any insurance. Because now you know everything...
 

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