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Life Insurance Buyers Guide
Insurance changes are often driven by life′s big events
Life changes. And as it does, so do your priorities. After all, the circumstances of your life can determine the type of coverage you need.

Decide how much Life Insurance you should buy

Decide what kind of Life Insurance Policy you need

Compare the relative cost of similar Life Insurance Policies


When you buy Life Insurance, you want a policy that fits your needs without costing too much. Your first step is to decide how much you need, how much you can afford to pay, and the kind of policy you want. Then, find out what various companies charge for that kind of policy. You can find important differences in the cost of Life Insurance by using the Life Insurance cost indexes that are described below. A good life Insurance producer or company will be able and willing to help you with each of the shopping steps.

If you are going to make a good choice when you buy Life Insurance, you need to understand what kinds are available. If one kind does not seem to fit your needs, ask about the other kinds that are described in this guide.


One way to decide how much Life Insurance you need is to figure out how much cash and income your dependents would need if you were to Die. You should think of Life Insurance as a source of CASH NEEDED FOR EXPENSES of final illnesses, paying taxes, mortages, or other debts. It can also prvide income to your family's living expenses, educational cost, and other future expenses. You rnew policy should come to close as close as you can afford to making up the difference between
1. What your Dependents would have if you were to Die now?
2. What they would actually need ?


All Life Insurance Policies agree to pay an amount of money if you Die. But all policies are not the same. There are THREE basic kinds of Life Insurance
1. Term Insurance
2. Whole Life Insurance
3. Endowment Insurance
Remember, no matter how fancy the policy Title or sales presentation might appear, all Life Insurance policies containone or more of the THREE basic kinds. If you are confused about a policy thats sounds complicated, ask the company if it combines more than one kind of Insurance.

Finding A Low Cost Policy

After you have decided which kind of life Insurance fits your needs, look for a good buy. Your chances of finding a GOOD BUY are better if you use two types of Index numbers that have been developed to aid in shopping for Life Insurance. One is called "SURRENDER COST INDEX" and the other is the "NET PAYMENT COST INDEX" It will be worth your time to try to understand how these indexes are used, but in any event, use them only for comparing the relative costs of similar policies. LOOK FOR POLICIES WITH LOW COST INDEX NUMBERS

What Is Cost?

"Cost" is the difference between what You pay and what You get back. If you pay a premium for life insurance and get nothing back, your cost for the death protection is the premium. If you pay a premium and get something back later on, such as cash value, your cost is smaller than premium.

The cost of some policies can also be reduced by dividends, these are called "participating" policies. Companies may tell you what their current dividends are, but the size of future dividens is unknown today and cannot gauranteed. Dividends actually paid are set each year by the Company.

Some policies do not pay dividends. These are called "Gauranteed cost" or "non-participating" policies. Every feature of a guaranteed cost policy is fixed so that you know in advance what your future cost will be.

The premiums and cash values of participating policy are guaranteed, but the dividends are not. Premiums for participating policies are typically higher than for guaranteed cost policies, but the cost to you may be higher or lower, depending on the dividends actaully paid.


Advantages of Life Insurance

Risk Cover - Life today is full of uncertainties; in this scenario Life Insurance ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event.
Planning for life stage needs - Life Insurance not only provides for financial support in the event of untimely death but also acts as a long term investment. You can meet your goals, be it your children's education, their marriage, building your dream home or planning a relaxed retired life, according to your life stage and risk appetite. Traditional life insurance policies i.e. traditional endowment plans, offer in-built guarantees and defined maturity benefits through variety of product options such as Money Back, Guaranteed Cash Values, Guaranteed Maturity Values.
Protection against rising health expenses - Life Insurers through riders or stand alone health insurance plans offer the benefits of protection against critical diseases and hospitalization expenses. This benefit has assumed critical importance given the increasing incidence of lifestyle diseases and escalating medical costs.
Builds the habit of thrift - Life Insurance is a long-term contract where as policyholder, you have to pay a fixed amount at a defined periodicity. This builds the habit of long-term savings. Regular savings over a long period ensures that a decent corpus is built to meet financial needs at various life stages.
Safe and profitable long-term investment - Life Insurance is a highly regulated sector. IRDA, the regulatory body, through various rules and regulations ensures that the safety of the policyholder′s money is the primary responsibility of all stakeholders. Life Insurance being a long-term savings instrument, also ensures that the life insurers focus on returns over a long-term and do not take risky investment decisions for short term gains.
Assured income through annuities - Life Insurance is one of the best instruments for retirement planning. The money saved during the earning life span is utilized to provide a steady source of income during the retired phase of life.
Protection plus savings over a long term - Since traditional policies are viewed both by the distributors as well as the customers as a long term commitment; these policies help the policyholders meet the dual need of protection and long term wealth creation efficiently.
Growth through dividends - Traditional policies offer an opportunity to participate in the economic growth without taking the investment risk. The investment income is distributed among the policyholders through annual announcement of dividends/bonus.
Facility of loans without affecting the policy benefits - Policyholders have the option of taking loan against the policy. This helps you meet your unplanned life stage needs without adversely affecting the benefits of the policy they have bought. Tax Benefits-Insurance plans provide attractive tax-benefits for both at the time of entry and exit under most of the plans.
Mortgage Redemption - Insurance acts as an effective tool to cover mortgages and loans taken by the policyholders so that, in case of any unforeseen event, the burden of repayment does not fall on the bereaved family.

How Do I Use Cost Indexes?

The most important thing to remember when using cost indexes is that a policy with a small index number is generally a better buy than a comparable policy with a larger index number. The following rules are also important:

    1. Cost comparisions should be made between similar plans of Life Insurance. Similar plans are those which provide essentially the same basic benefits and require premium payments for approximately the same period of time. The closer policies are to being identical, the more reliable the cost comparision will be.
    2. Compare index numbers only for the kind of policy for your age and for the amount you intend to buy. Since no one company offers the lowest cost for all types of insurance at all ages and for all amounts of insurance, it is important that you get the indexes for the actual policy, age, amount ehoch you intend to buy. Just because a "Shopper's Guide" tells you that one company's policy is a good buy fo a particular age and amount, you should not assume that company's policies are equally good buys.
    3) Small differences in index numbers could be offset by other pilicy features, or differences in the quality of service you may expect from the company. Therefore, when you find small differences in cost indexes, your choice should be based on something other than cost.
    4) In any event, you will need other information on which to base your purchase decision. Be sure you can afford the premiums and that you understand its cash values, dividends, and death benefits. You should also make a judgment on how well the life insurance company will provide service in the FUTURE to you as a policy holder.
    5) These life insurance cost indexes apply to new policies and should not be used to determin whether you should drop a policy you already have for a while, in favor of a new one. If such a replacement is suggested, you should ask for information from the company that issued the old policy before you take action.