Life is beautiful, but also uncertain. Whatever you do, however smart and hard you work, you are never sure what life has in store for you.
It is therefore important that you do not leave anything to chance, especially ‘life insurance’. As death is the only certain thing in life, apart from taxes, it pays to insure it well in advance.
Let us explain.
If you were to go by the dictionary definition, “life insurance” is a financial product that pays you or your dependants a sum of money either after a set period or upon your death as the case may be.
However, if you were to understand the term clearly and also appreciate its importance in your life, consider “life insurance” as a back-up plan for life. Life insurance in its simplest form means being prepared financially, come what may. It ensures that your family and you receive financial support in case you are not able to bring in the much-needed income yourself (maybe due to an accident, retirement, or untimely demise).
In legal terms, life insurance is a contract between an insurance policy holder (insured) and an insurance company (insurer). Under this contract, the insurer promises to pay a pre-decided sum of money (also known as “Sum Assured” or “Cover Amount”) upon the death of the insured person or after a certain period.
The significance of having a life insurance is to avail the "peace of mind" that it brings along. However, having an adequate amount of life insurance effectively sets your mind free of some important questions like:
- What will happen to my family financially after I die?
- How will my wife and kids take care of their expenses after I am no more?
- How will I provide for my family in case I lose my job after an accident?
- How do I ensure that I am able to fund my child’s higher education?
- How do I ensure an income after my retirement? Now, in order to have a financially secured future, you (the insured) have to pay the insurer (insurance company) a “life insurance premium”, which is either a regular annual payment or a one-time payment as the case may be.