A life insurance is an important tool to get coverage for various risks one can encounter in life. Thus, a lot of thought should go into finalising a suitable life insurance policy. You should be well aware of the various types of life insurance plans and their key roles in providing protection at different stages of life. Here is a quick guide to help you understand certain important aspects before purchasing a life insurance plan.
- Understand your Requirement: Evaluate the purpose and the need for purchasing a life insurance. In case you have a family and you wish to provide a simple financial protection for your dear ones after your sudden demise, you can opt for a pure term plan with a coverage of at least 15-20 times the present annual income. However, in case you want to go for both coverage and investment or savings in order to meet additional responsibilities like children’s studies and marriage, you can opt for ULIPs, endowment plan or child plan. However, you need to understand that these plans give high returns because they are market linked, thus, you should be prepared for taking some risks.
- Affordable Premium: Considering that you might have various financial liabilities, go for a premium that is affordable and does not become a burden later. You might have other liabilities like home loans, other EMIs, household expenses, etc. So after buying a life insurance you should not be in a situation when the premium for your life insurance creates a hole in your pocket, and you are forced to surrender the policy later.
- Policy Term: Deciding the term or duration of the policy is an important aspect to be kept in mind while purchasing a life insurance. The duration of the plan will depend on various factors. Some of them are your current age, your health condition, number of family members and various responsibilities to be discharged at various stages of life. Thus, the term should be such that you are able to meet the responsibilities till you are working.
- Sum Assured: Another important point to be considered is the sum assured which is the amount you get on the maturity or on the death of the insured. This coverage amount should be calculated after analysing your present salary and requirements, amount needed after you retire and other needs in the family, such as home loan to be paid, children’s higher education and marriage. Thus, in case of your untimely demise, the death benefit you get as sum assured should be enough to manage these responsibilities.
- Claim Settlement Record: You should opt for those insurance companies that boast of a good history of claim settlements. This feature is all about the history of the number of death claims settled compared to the number of claims received by the company. This is an important aspect not to be missed, so that you get the benefit when you need it the most.
- Know the Plan Well: Never go ahead with a policy without understanding its features well. Learn about the riders offered with that particular plan and whether you need them. These riders are additional benefits that you get to enjoy at a little extra cost. These can add more value to your plan. Also know about grace period, free look period; and various funds and charges applicable in case of ULIPs.
A life insurance is a long-term contract between an individual and the insurance company, wherein, you are putting in your hard-earned money for getting your risks covered. Thus, it makes sense to have an idea about its working and features in order to get the best deal.