Things to know before you invest in life insurance
Gone are the days when talking about life insurance was considered taboo. With the launch of new-age insurance companies, choosing a life insurance policy that suits you the best is not possible. However, in the uncertain environment that we currently live in, it is necessary to invest in life insurance to protect your family and loved ones in case of any unfortunate events by securing your financial commitments. It is the reason why financial advisors stress the need to buy life insurance as soon as you start earning for locking in at low premium rates.
Ronit Kumar has just got placed in an MNC as a mobile app developer. With a handsome salary in his hand, he did not have any big-ticket expenses as he was living with his parents. While planning to buy a bike for himself, his father explained the need for a life insurance policy and why he should avail it at that age rather than purchasing a two-wheeler. On his dad’s advice, Ronit immediately started searching for the best life insurance plans in India and found quite a few that suited his requirements. Since he was young, the premium was also on the lower end, which made him purchase his first insurance plan. Having understood the financial security that the policy provides, Ronit is more satisfied with putting his first month’s salary to best use, which will protect him and his dear ones for years to come.
How can life insurance help you?
There are numerous life insurance plans in India, each with its own set of attributes. But here is how a policy helps you in tragic times. An insurance policy is a contract between yourself and the insurance company, with the latter promising to pay an amount pre-decided by the policyholder, to his or her nominee, In case the insured person encounters death, accident or illness. In exchange for this payout benefit, the insured person commits to pay a specific amount called the premium for the entire duration of the plan.
Top 5 Things you should know before you invest in life insurance
- The need for Life Insurance
- Premium for the Policy
- Know about all the features
- Additional covers for protection
- Is the company reliable
While you embark on the journey to buy a life insurance policy, choosing a proper plan from a wide range available in the market, here are some important tips that you should know before making that first investment.
1. The need for Life Insurance
Know the exact requirements of your family before you buy any insurance plan. Every individual in the family will have a specific expectation from you. You must understand it and ensure a suitable plan exists for them to accomplish it, even when you are not around in this world. Similarly, calculating the monthly expenses for maintaining a certain type of lifestyle is also essential, as your family would need to sustain it after your demise as well. By taking into account all of the above, you must arrive at an optimum insurance coverage that ensures it aligns properly with your family’s needs.
2. Premium for the Policy
The premium is an amount that one needs to pay to reap insurance benefits. You may choose to pay the premium monthly or quarterly, or yearly, but make sure it fits within your budget. The common mistake that most people commit in fixing the insurance premium is to opt for a policy with a higher cover without any proper need. While it is essential to lock in lower premiums at a young age, choosing the right coverage amount is equally important rather than paying higher premiums. But do not search only for policies with low premiums as it could affect the features you derive from the policy. Finding a balance between the policy benefits and premiums will help you stay out of disappointment.
3. Know about all the features
Each insurance policy is created to address the specific needs of the individual. So, get to know the real benefits of an insurance policy by reading through their documents in detail. Make sure to do your research about it on the internet if you buy life insurance online. Purchasing life insurance is a long-term investment decision, and getting to know its features and offering should carry utmost importance. Check for the policy’s advantages, disadvantages, pitfalls, comparisons, reviews, etc., before signing the policy documents.
4. Additional covers for protection
Once you have purchased a life insurance policy, it is possible to extend its coverage and functionality through riders. Riders or add-ons are additional covers that can be attached to an existing policy to protect against specific risks such as health, accidents, disability, etc., in addition to the normal benefit that is already available with the policy. Some of the common riders offered with life insurance policies are Accidental Death Cover, Accidental Disability Cover, Premium Waiver Cover, Critical Illness Cover, Terminal Illness Cover, etc. These add-ons can be purchased at an extra cost over and above the regular premium for that plan.
5. Is the company reliable
During an unfortunate event of death, one can initiate a claim on the policy to get the benefit amount. The total percentage of claims settled by an insurance company against the total number of claim requests made by the policyholder during the financial year is called Claim Settlement Ratio (CSR). Therefore, it is very important to check for the CSR of insurance companies to gauge whether they are reliable. An insurance provider with a low CSR means many claim requests are being rejected, but a high CSR denotes the insurer possesses a good track record of settling policyholders’ claims. Hence, the best life insurance plans are usually those issued by an insurer with high CSR, and availing them helps you to stay clear of any confusion when filing a claim.
Although the primary purpose of insurance policy is to provide live coverage from risks of life, some types of policies do offer modest returns, which is not suggested by financial experts, as it dilutes the reason for life coverage. But in this era of digitization, one may choose from the available policies and also buy their desired life insurance policy online, saving both time and money.