Make sure to check all terms and conditions before you hastily invest in Life Insurance. Read on.
Life insurance is one of the most important components of financial planning. It ensures financial support to the family of the insured person in the event of his/her death. The sum assured of a life insurance policy acts as a way to replace your income in your death. By extension, it would allow your family to meet its income needs, pay its loan, educate your children and so on.
There are lots of varieties in life insurance and if you are planning to buy one, you must understand your requirements to get the appropriate product. While buying an insurance policy, you must take care of certain important points. Let’s check them out.
Check The Type of Policy
There are endowment insurance plans, term policies and ULIP schemes. You must know the difference between each policy. Endowment policy and ULIP offer investment benefits along with the life cover. But a term plan only provides a life cover with no maturity benefits. If you are looking for only death benefit cover, then term policy is the most suitable option for you.
What is The Policy Tenure?
The policy should be able to provide you with the cover until your retirement day. For example, if your current age is 25 and you want to retire at an age of 60 years, then the policy should allow a cover of at least 35 years. There are many policies in the market which allow covers up to 75 years age or even more. Ideally, the tenure should be long enough to cover you during your working years.
Add-ons With Life Policies
Add-ons available with a life policy can save you money that you otherwise need to spend to buy a standalone policy. For example, a life policy with an accidental death benefit, critical illness covers and with partial or permanent disability benefit can add huge value to the base policy. You must evaluate your requirement before buying an add-on rider with the life policy.
Check Claim Settlement Ratio
The Claim Settlement Ratio shows what percentage of the total insurance claims were settled in the past year by an insurance company. The higher the CSR, the better for you. The IRDA releases the settlement ratio data every year, which can help in choosing the right insurer. Remember that your family will make an insurance claim after your death, and you won’t be around to fix any problems arising from a claim rejection.
Check the premium costs of the policy. There are many life policies available in the market which charge very low premium. Don’t compare policies by price alone. Also compare CSR, service quality, size of sum assured, tenure, riders, and so on. You should buy the best possible cover your money can buy.
Changing Sum Assured
Normally, when a policy is bought, its sum assured doesn’t change. You can also consider a policy whose sum assured increases over the tenure. This allows you to cover your life more effectively against inflation risks. Similarly, some insurance companies allow you to pay premium for a limited period and provide life cover for the entire tenure as per the policy term. You must check the feature available on the policy and compare it with other similar policies in the market to make the right selection.
Read the Terms and Conditions; Declare Facts Correctly
Always read the policy document carefully before you buy a life insurance plan. Reading the fine prints can help you to find out the adverse clauses that may go against your family when a claim is required. Similarly, while filling your form, always declare all facts pertaining to your life and health correctly.
Online vs. Offline Buying
Buying a policy online or offline has its advantages and disadvantages. Always compare the features, price and service quality when you plan to buy a policy. Online policies are gaining popularity due to lower premium costs. You can also speak to tele-advisors to help decide which policy is best for you.
Life insurance is a long-term commitment meant to help your family in case of your untimely demise. Always take the time compare, research, and buy the right product. Buying the wrong policy can put your dependents at financial risk. So give your policy purchase the care and due diligence it deserves.
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