Everyone in their lives must set their priorites which often include securing the future of the dependant family in worst case scenario of your passing away, child education insurance, marriage, buying a house, car, holiday abroad every year, supporting parents, retirement planning.
It means, they must understand various policies available. Broadly, the various policies can be categorised as term insurance, which is purely a life insurance cover to provide for the dependant family members in case of untimely death or critical illness of the earner. It pays out only on the death or illness of the policy owner. If the insured survives the policy term, the insurance elapses and you get nothing. The premium in this type of policy is the lowest than of other insurance policies.
There is also endowment plans, the one that combine investments and insurance cover. Depending on the terms of the policy payments are made both if death occurs or on maturity of the plan. Premiums paid are invested by insurance companies generally in safe bonds. As you are guaranteed bonuses, the premium in such policies is higher than in term insurance.
But you need a few pointers for selecting the correct policy. Choose the one in which the amount of cover 8-10 times your annual income. Consider if the policy will mature in time when you foresee a requirement like your child’s higher education or marriage. You should also take into consideration your other cash venues, if you already have an adequate pension fund then perhaps a term insurance will suffice.
Then, opt for policies that offer flexibility, for e.g. in case of non fixed income the time of payment of premium can be varied. Check out the riders available, they can enhance the value and cover of a policy for e.g. accidental death rider, waiver of premium rider. Choosing a good insurance company by studying its records of bonus payments etc. Do not treat life insurance as a tax saving instrument only, it will lead to being either under or over-insured or you may even be saddled with a wrong policy.