life insurance policy is crucial for every breadwinner. His/her untimely death
might leave the family in a tough financial situation. It is therefore imperative
to plan in advance to support family members during such crisis situations.
presence of online aggregators has made the purchase of life insurance policies
simple. You can view the features and buy the policies at the click of a
button. Here’s what you should bear in mind before you choose the policy:
Analyse your needs
You should calculate the cover you need based on which stage of life you
choose to buy the life insurance policy. You would have to consider the number
of dependents you have, their financial requirements, other sources of income
your family might possess, etc. The sum assured should be enough to support
your family members until they can manage their expenses.
Making specific goals might help you ascertain the cover you need. You
could list out your current requirements, the expenditure it incurs and how
much it would cost in the future. For instance, your child might be in
pre-school when you buy the life insurance policy. Ideally, you should find out
the approximate education costs right up to graduation. You might have to add a
few extra thousands to balance out the possible inflation. Calculating the rest
of your requirements likewise will help you get a clear picture of the sum
assured you will need.
Pick the one with the longest term
and more benefits
In the case of whole life insurance policies, there will be a pay-out
when the insured dies. But in the case of term life insurance policies, there
will be a pay-out only if the insured dies during the specified term. Hence, if
you’re buying a life insurance policy early in life, it would be better to
choose a whole life insurance policy or the one that offers the longest term.
Apart from whole life insurance and term life insurance, there are endowment
plans, ULIPs (Unit linked insurance plan) and money back policies.
Endowment plans are basically for a specified term
and they offer a maturity benefit. The sum assured can be availed along with
ULIPs are a unique combination of insurance and investment.
The sum assured can be claimed either on death or maturity.
Money back policies offer regular payments. On the
death of the insured, the beneficiary will receive the sum assured. In case the
insured survives, he/she can claim the balance sum assured.
Pick the right company
You should check the claim settlement ratio of the company i.e. the
number of claims settled against the number of claim requests received. A
higher ratio indicates that the insurance company is more likely to settle the
claim smoothly. Verify the premium charges that have been imposed for the
policy. Make sure they are affordable. Learn about the number of branches the life
insurance company has so that the claim settlement process is easy.
It is important to consider these factors before deciding the best type
of life insurance policy to buy. Stay informed of all the terms and conditions
of the policy.