Archive | June 2015

Things to Consider before Buying an Insurance Plan

When ever someone makes some purchase, one need to see that it will serves useful to the user. Without which, it would be of not use of buying that particular product. The same thing can be applied to insurance. There can be many kinds of insurance plans, but the main thing to consider, before getting committed to any plan, is that one need to see whether the particular plans satisfies the needs of the user or not.

The Two Main Things

There are two main things which one need to consider before buying any insurance plan, they are–

How much they need the insurance, and nextly the time period of the plan. How much you need the insurance will depend upon the need and the affordability of the insurer and the time period of the plan depends on the requirement of the insurer.

Correct Estimation Is Required

Before buying any insurance plan, one important thing is that how much you need. It is always advisable that the insurer buys such a insurance policy which suits best to their need. For this to accomplish, one need to evalutate the need of them correctly, underestimation and extraestimation, both are not good. In either of the situation, the purpose of having the insurance policies may not be served well. Buying an expensive policies which is beyond the need of the user is useless. Because, buying the insurance policy is not for showing someone that you are so much potent, but in fact these are meant for meeting the actual needs of financial protection of the user. At the same time, buying such a insurance policy which cannot meet up the requirement of the user is not useful. In either of these cases, the actual purpose of having the insurance plan will not be served.

Check The Time Period Of The Plan

Another important thing to consider before buying the insurance plan is the time period of the particular insurance plan. There can be short term plan and long term plan, each of which has its own advantages and disadvantages. One need to consider all the benefits and limitation of these plans and need to select the best plan which suits best to their situation.

Traditional Insurance –Now Becoming Obsolete

Defining Traditional Products

If one has to define traditional insurance plans then you need to include terms like fixed income returns, tax benefits, safety benefits and risk cover. The insurance as an industry started off with such plans that are now known as traditional Insurance plans and was devised at a time when people by and large played safe and took minimum risks with their money. Even today you find a few people with an extremely low risk appetite and hence the plan continues.

Insurance And Investment

The traditional insurance policy plans are well defined and provide both the sum assured and a guaranteed bonus at maturity. With a minimum possible risk in high risk equity these plans have almost no downside probability. The few that opt for such policies have tax planning at the back of their mind. The primary downside is that premature withdrawal is generally not allowed in the case of traditional plans.

These plans also come with money back and since they offer very low sum assured at high premiums and this is one great disadvantage because one has to pay quite high premiums to get higher sum assured.    The crux of the policy is if the insurer dies before the term ends then his or her beneficiary will get the sum assured and bonuses as defined by the policy. On the other hand if the insurer survives, he or she will get sum assured and loyalty addition and other bonuses as agreed in the policy.

Estate Tax Repeal

Beyond a doubt the traditional policy plans help in providing affordable protection that can take effective care of all sorts of financial storms or emergency needs, such as disability, retirement and even death. However such plans only provide a temporary solution for financial needs planning. They do not stand up to escalating costs, inflation and fails miserably when it comes to the perspective of offering a permanent solution for an aging population. The impact of some of the recently enacted federal tax legislation on the life insurance industry is only too obvious. The estate tax repeal is sure to end the sales of traditional life insurance products.