Most Pakistanis will remember the State Life advertisement aired in the early 1990s, in which a young girl was seen playing with her father in the mid-second decade.
Then the father of the girl disappears after which he is thankful for having a family life insurance policy.This ad was quite popular but it did not answer an important question is Life Insurance And most importantly, should you have insurance?
Obviously, the second question depends on your personal financial situation.But when deciding on an insurance policy, it will be helpful to know how life insurance works and what different types of insurance they have.
people are knocking on your door and trying to sell you life insurance, this information may help you understand their motivation.
The basic concept of life insurance is this: Most of us have financial obligations to our families that we plan to fulfill in our lives, especially those with children, elderly mothers.The father or other person depends on them.
But what if you die before you fulfill those responsibilities?
But life insurance provides financial protection for your loved ones after your untimely death, so that when they suffer the loss of your untimely death, the least risk of financial loss is due to insurance. Will not be able to
Let us tell you how insurance works. Suppose I go to a 29 year old, smoker, life insurance policy at the insurance company.
In other words, if I die tomorrow, how much do I want to pay my inheritance from the insurance company?
Now that I am a young, unmarried man, it does not matter to me that I have a small amount of debt left over, then I will choose the equivalent of my total debt for insurance.
How policies work and how to think about choosing the best policy for yourself.
Other people can choose the amount they want.Of course, if you owe money, they should also include the amount of insurance money.
Also include the total amount you are planning to save on for things like children’s education or retirement.
Collect these amounts and then look for insurance that is sufficient for that amount.
The insurance company will guarantee that your loved ones will be cared for, and of course, you will also have to pay a monthly premium for this guarantee.
The amount of premium depends on various factors including your age (younger people are less charged than older people), health (smokers are charged more).The type of policy you are choosing.
Obviously, very few of the people who take out insurance can die on time or in early life, so the insurance company makes money in the form of premiums from all people.Premiums are invested in various sources such as stocks and bonds.
Families of underage people are paid from lovers paid by other older persons.
You may also understand why some people are charged less money than others.If you are younger then you are less likely to die before the policy expires, but if you are older then you are likely to die during the policy period And if you are addicted to smoking, you probably bring yourself closer to death than people who smoke.
Now you may be wondering what happens to my paid lovers if I do not die at an early age?
We have now come to the point where two different types of insurance are available to us: the first is Conventional Life Insurance and the second is Term Life Insurance.
In Conventional Life Insurance, you actually pay a premium for two things: the first is that you provide insurance for your family in the event of your premature death.The second is an investment account that is paid in all periods.The amount collected goes up.If you survive your 60th birthday, you will receive the money in your investment account, which can be a pretty good amount.
In ‘Term Life Insurance’ you pay a small premium but if you do not die and turn 60, you will not get anything from the insurance company.
So why would anyone want to choose term insurance?
First of all, Term life insurance premiums are much lower than Conventional Life Insurance.If the amount of insurance is equal in both types of insurance then you will have to pay Rs 500 per month for term life insurance while paying 5,000 (or more) per month in Conventional Life Insurance.
The other major difference is the structure of the commission.
75% of the premiums paid in the first year of the Conventional Life Insurance Scheme and 90% of the premiums paid to the agent who sold you the policy.
Only from the second year do you start to accumulate your capital.When considering a life insurance policy of 20 years or more, you may not have to pay a one-year commission, but it can bring your profits to an even greater extent than you think.
Due to the difference in the structure of this commission, insurance agents appear to be less willing to sell term life insurance than congressional insurance.
Of course, my goal is not to suggest which of them is better.
My purpose here is just to tell you what different qualities these two have.If you want to be sure of a payout or a refund on the insurance policy, are willing to use the insurance policy for a money-saving plan and are willing to pay commissions then you can get Conventional Life Insurance. Should choose.
Term life insurance would be the best choice if you just want timely death protection and want to use mutual funds and other sources of investment.
So what do you think about the first question: Should you have life insurance? So one of the questions you have to ask yourself is: “Do you feel lucky in your life …?”
The purpose of this article is to provide information only about sources of financial services.
This article does not imply endorsement or recommendation to buy or sell securities or any other financial means. Readers should carefully research themselves before making investment or financial decisions.