While taking a life insurance, you need to nominate someone as a nominee. What should you keep in mind before nominating someone, who should be your nominee; questions like these have been answered for you in the following article:

Who is a nominee?

When you take a life insurance policy, you have to nominate someone who will receive the assured amount incase of any untoward happening. A nominee has no right in the proceeds of the policy, except as a trustee holding the proceeds on behalf of the legal heirs of the insured.

Can an immediate family member only be nominated as a nominee?

It solely depends upon the decision of the person who is being insured. The basic purpose of a life insurance is to support an individual’s family members in case something happens to him. Usually insurance companies prefer immediate family members but an individual can choose even a non-family members.

What if I want to nominate my child who is a minor as a nominee?

In case if the child is a minor, an individual will be required to name another person as an appointee.

It’s always better to be knowledgeable about some basic things which will help you make a smarter decision before buying a product. Taxsavers brings to you some of the basic terms that you must know before buying insurance policy.

1. Insured: A person whose life is being insured.
2. Insurer: The insurer is the life insurance company that undertakes the responsibility to the assured money to the nominee on the occurrence of the insured event.
3. Nominee/Beneficiary: The person who will receive the policy proceeds in case of death of the insured. The owner of the policy designates the nominee but the nominee is not a part of the insurance contract. The name of the nominee can be changes unless it is not mentioned in the policy.
4. Premium: A periodic or a single payment that a policy holder makes to the insurance company in exchange for the insurance company’s obligation t pay out the sum assured.
5. Maturity: There are a few insurance policies which are valid to a certain time period only. When this period expires, the policy is said to have reached maturity.
6. Lapse: When the policy holder is unable to or does not pay the premium any more, within the grace period, the policy is said to have lapsed.
7. Sum Assured: The money that the policy will pay out to the nominee in case of the insured’s death or the occurrence of the insured event.
8. Policy Holder: The owner of the policy is a policy holder or the person who buys the insurance policy is also known as the policy holder. The insured and the policy holder can be one or two different people.

What do you look for while buying insurance? Taxsavers provides you three tips you must keep in mind while buying insurance:

1. Prime reason to buy insurance is for protection: A life insurance should never be bought keeping in mind tax deductions but because there is a need of protection your life. Tax Deduction is an added advantage that comes with a life insurance. Most people today buy life insurance for the wrong reason, without having the slightest of inclination of how much coverage is needed by them. As a result of which they get over or under insured.

The calculation before buying a life insurance should be based on individual’s financial obligations that his surviving family will have to bear in the unfortunate event if he is not around.

2. Paying premiums: Insurance is basically a life term contract between an individual and the Insurance Company. For the validity of the contract, it’s very necessary that an individual pays his premiums on time.

While in some policies there is a provision of single premium, many other policies demand for annual premium as well. Therefore an individual must understand his ability to pay his premiums before buying a life insurance.

3. Keep a note of the paper work: Always make sure that you go through all the terms and conditions of insurance before buying one. Do not let your insurance agent fill the form for you. An individual should himself read the entire form carefully and only then should sign the contract. It’s you who is buying the contract not your agent.

No one can overcome the emotional loss of a close family member but insurance will help an individual’s family overcome the financial loss to some extent. All he need to do is to buy it with open eyes and choose the right coverage.

An individual buys life insurance to get financial security, in monetary terms, for his dependents in case of his death. This money is called sum assured. Fixing the correct amount of sum assured is a crucial activity at the time of getting a life insurance policy. Taxsavers brings to you some details, which you must have before opting for insurance:

What is Sum Assured?

At the time of signing a life insurance contract, the buyer and the insurer agree upon a certain amount of money payable upon the death of insured to his nominee.  Sum Assured depends upon different factors such as the total net asset of the individual, his family’s current and potential fixed annual income and expenditure, his age, the age of his dependents and any loans or liabilities due.

Basically the amount should be enough to see his dependents through till the time they are able to fend for themselves. It is suggested that the sum assured should be 5 to 10 times your annual income.

Premium and Sum assured

Insurer pays premium because of the sum assured. Different types of insurance policy have different relations. Traditionally, Sum Assured determines the premium. The sum is broken into small amount which is paid by the insurer monthly. This amount is known as premium.

Riders on Sum Assured

Riders is a special provision in an insurance policy that can expand the benefits or the Sum Assured that is payable. In case an individual has a rider for accidental death or disability, apart from being eligible for the death benefit, his policy will also pay out an additional amount if his death is due to an accident as defined in he rider. In case if the accident disables him, while the life policy might not compensate him, the rider will compensate him up to his pre-determined amount.

Why is it necessary to revisit the sum assured regularly?

It is always advisable to review the Sum Assured regularly, especially if there is a major change in an individual’s financial situation. For example:

• If there is a change in the marital status.
• Birth and death in the family that adds or reduces the number of the financial dependents.
• If a home loan has been taken to buy a house.
• If there is a salary hike.
• When children become financially independent.