Why and When you require to have an Insurance Policy

Many people who are not well acquainted with insurance most often ask questions like what is the requirement of an insurance policy and why should i have one. If you have the same question then this article will help you to get an answer.

Insurance can be taken as an investment or a risk coverage option. It depends on the policy holder’s requirements and necessity.

It’s not required that everyone needs to have an insurance. You may not require an it if your income is not a major necessity to your family members.

Insurance policy is a must if you are satisfying one the following situations;

  • You have dependents and you want to protect them from risk or you want an investment When you need an Insurance Policyfor a particular goal like your children’s education or marriage.
  • You do no have enough assets to take care of your family after your death.
  • Your Family member does not earn anything.
  • You are working and your salary is important to support your family.

If you have any of these situations then you must have an insurance to cover up these risks.

To select the right policy, one must consider the need and offers of insurer companies.

We have listed 3 basic questions to help you prepare yourself in deciding certain factors while going for an insurance policy;

How much a policy will cost

There are hidden cost such as fees and commission that you may not be aware unless you buy the policy. Before buying you should be aware about that.

What type of policy do I Need

Decide the insurance plan based on your requirement. If you want to cover your risk then go for a term plan or else an endowment plan for investment purpose.

What is my requirement

Requirement depends on factors like inflation, your source of income, dependents you have, your debt/liability and the lifestyle you enjoy. Generally it’s suggested to have a plan which covers 8 to 10 time of your annual income.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.