With a plethora of Life Insurance products available in the market, choosing the right insurance policy can be challenging. Here’s your guide to picking the best Life Insurance policy.
Have plans to buy a Life Insurance policy but confused about picking the right one? We totally get it! With a plethora of Life Insurance products available in the market, choosing the right insurance policy can be challenging.
To make things easier for you, let’s take a look at various Life Insurance products and how to select one that’s perfect for you.
Additional Reading: Everything You Need To Know About Life Insurance
Start With The Basics
So, the main purpose of buying a Life Insurance policy is to financially protect your ddependentsif something were to happen to you in the future. A dependent can be anybody who relies on you as a primary source of income like your parents, spouse, children, siblings etc. If you are single with no dependant, you don’t need a Life Insurance policy. However, if you have someone who depends on your income, then buying a Life Insurance policy is a must.
Life Insurance Products
Broadly, there are four Life Insurance products available in the market – Term Life Insurance, Unit Linked Insurance Plans (ULIPs), Money Back & Endowment plans.
Term Life Insurance:
It is a type of life cover that provides you with a fixed coverage amount for a well-defined period of time. In this plan, if the insured expires during the term of the policy then the death benefit is payable to the assigned nominee.
These plans don’t have any savings and investment element attached to it as they are purely designed to provide protection against an unforeseen event, like sudden death due to an accident etc. and thus have comparatively low premium and a higher sum insured than other Life Insurance plans.
Know more about different types of Term Insurance plans here.
BB Pro Tip: Cost of Life Insurance premiums is directly proportional to the age of the insured. So, as you get older, the amount of premium also increases. It’s smart to invest in a Life Insurance plan as soon as you start earning.
Additional Reading: Death Claim: Documents Required For A Life Insurance Claim
ULIPs combine the benefit of insurance and investment. The premium that you pay towards this policy is partially used for risk cover and the rest is invested in funds of your choice – equity, debt or balanced.
BB Pro Tip: As part of the premium goes towards investment, the amount of cover that these plans offer may not be sufficient, therefore, it’s best to buy a term plan first and then consider ULIPs to get an adequate amount of coverage.
An endowment plan is a type of Life Insurance policy that provides you with a Life Insurance cover and at the same time helps you save regularly over a specific period of time. Here, when the policy matures, you get a lump sum amount when you survive the policy term.
In a money back plan, the policyholder receives a percentage of the sum assured at regular intervals during the policy term as part of the survival benefit. It is also known as anticipated endowment.
BB Pro Tip: You can claim tax benefit on all Life Insurance policies under section 80C of the Income Tax Act.
Quick tips for buying the right Life Insurance policy:
- Choose a policy with the lowest premium and a claim settlement ratio of more than 85- 90%.
- The rule of thumb says that one should get a life cover that is at least 10 times of your annual income.
- Check out the persistency ratio that shows the insurer’s customer retention record. Higher the ratio, the better.
- Always do thorough research about the history and reputation of the insurance company before zeroing in on a lender.
- It’s good to get details about the company’s investors, partners, and Third-Party Administrators. You’ll find these details on their website easily.
Now that you are all set, it’s time to get the right policy! Compare lenders and explore your options right away.