A life insurance policy is a legal contract between you and the life insurance provider. it’s important to choose the right life insurance policy. Life is full of uncertainties, everyone needs to be assured of the safety of their loved ones. In return for a regular premium paid by you, the insurer provides protection to your loved ones after a certain period, known as maturity, or in case of your demise. This can be done by protecting yourself with a life insurance cover.
However, apart from being a financial safety net for your loved ones in your absence, life insurance has some other benefits. It can be a savings cycle, provide you with financial independence in your old age and help reduce your tax liability. There are many reasons to invest in life insurance.
However, there are many policies available in the market, choosing the most suitable plan as per the need and suitability can be a difficult task. There are many different aspects that one should consider while buying the right life insurance policy.
How to choose the right life insurance policy?
Here is a guide to help you choose the right life insurance policy to suit all your needs.
1.Evaluate your life insurance goals
Everyone’s life goals are different. You should plan your life insurance goals with the help of a suitable life insurance policy. If your goal is to secure the financial security of your family, you can buy a term insurance plan that offers high coverage at affordable rates.
If you want to save for your child’s education or buy your dream home, you can avail the benefits of investing in a unit-linked insurance plan. You can also buy a retirement plan which will give you regular income for your daily expenses after retirement.
2.Calculate the maximum insurance cover you need
Generally, your life insurance cover should be at least ten times your annual income. However, there are several elements that you should consider while estimating the best term life insurance amount. If you have a loan, it can be challenging for your family to meet the Equated Monthly Instalment (EMI) in your absence.
Along with this, you will have to arrange money for your children’s higher education or marriage. As a result of inflation, your family may also face difficulties in maintaining their current lifestyle in the absence of the primary earner.
3.Determine the amount to be paid as premium
You can use an online premium calculator to find out the premium you will need to pay for the required amount of life cover. Compare different plans to find the policy that offers the highest coverage at rates that fit your budget. You should also assess your premium paying term based on your earnings for the coming years.
4.Select the right policy term
The term of the policy should ideally be the number of years your family will be financially dependent on you. The general rule of thumb to arrive at the ideal policy term is to subtract your current age from the age at which you wish your income to stop or achieve a particular life goal.
5.Don’t hide facts from your life insurance provider
If you consume tobacco or alcohol, or work in a hazardous industry, inform your life insurer about these details. You will also need to mention about any existing diseases or family history of serious diseases. These factors affect your risk profile. Providing accurate information is important to prevent claim rejection in the future.
Read more: Life Insurance – Features, Benefits and Types
6.Look for long term investment
Always try to go for long term investment as it will provide more returns as compared to short term life insurance plan. By purchasing a life insurance policy for a longer policy term, a person can choose a higher sum assured in exchange for lower premiums.
Also, if the policy buyer opts for a savings cum insurance plan or other products of the life insurance policy, they will have a longer tenure to create a financial cushion for their loved ones and help them get more benefits of the life insurance plan. There will be help.
7.Read the final policy document carefully
Understand all the terms and conditions clearly, before you make the final commitment. Find out relevant details such as the lock-in period and the circumstances in which the claim will not be valid.
8.Buy life insurance policy at an early age
Nowadays, people follow an ignorant lifestyle and are living in a world with rapidly developing technologies. Also, with increasing age, the responsibilities also increase. Hence, it is very important to choose the right life insurance policy at the earliest. choose the right life insurance policy at a young age not only gives the advantage of paying lower premium for higher sum assured but also gives the advantage of saving for a longer period.
9.Choose a Comprehensive Plan
Medical emergencies can affect your income. Hence, it is essential to choose the right life insurance policy, for you:
Critical illness rider provides full claim payout if you are diagnosed with a critical medical condition such as kidney failure, cancer, or heart disease. This amount can be useful in meeting the cost of treatment and protect you from loss of income due to such diseases.
Accidental Death Benefit Rider provides an additional amount to your loved ones in case of sudden death due to an accident. This protects your family’s future from the threat of disrupting a regular flow of income to maintain their current lifestyle.If you become permanently disabled due to an accident, the permanent disability rider acts as a waiver for all your future premiums. Your life cover ~ continues through the remainder of the policy term.
Terminal Illness Rider gives you access to funds to deal with terminal illness like cancer by providing full payout before death.If you have always been on the lookout for an insurance provider that provides you with such benefits without any hidden charges, then this would be helpful.
10.Analyse the Inclusions and Exclusion of your Insurance Cover
While purchasing a life insurance policy, it is advised that the insurance buyer takes the assistance of an insurance agent to understand the fine lines of the life insurance policy documents like its exclusion and inclusion. It is important to know what the things that the policy does not cover are. By knowing these things, an individual will be able to make an informed decision and prevent their family from unwanted hassle at the time of filing a claim.
11.Compare Policies
This is another important step to take while buying a life insurance plan. There are many different variants of life insurance policies available in the market. As every buyer has his own requirements and choices, the policy which may benefit the other person might not be beneficial to you. Thus, it is significant to compare the quotes of different plans online as per one’s own specifications, so that an individual can choose the most beneficial plan for themselves, which offers all the benefits and covers as per the requirements.
12.Know the Claim Settlement Ratio of the Company
If a person is planning to buy a life insurance policy, it is necessary to check the claim settlement ratio of the company before buying the plan. It is very important to do a background check of the claim settlement history of the insurance company.
Always try to choose the right life insurance policy companies which have high claim settlement ratio. The higher the CSR of an insurance company, the more reliable it is. The claim settlement ratio of an insurance company is defined as the percentage of insurance claims settled by an insurance company divided by the total number of claims received in a year.
A company with a good claim settlement ratio guarantees that in the event of any eventuality, the insurance company will process the claim and the beneficiary of the policy will be given the benefit.