While purchasing an insurance policy should be on of your top priorities, there are a few things you need to consider before buying one. Read on to know more!
Purchasing an insurance policy could be one of the best financial decisions you could ever make since it can cover you against all kinds of losses, depending on the type of policy you buy. However, it would be prudent of you to take a few things into consideration before taking the plunge. Here are a few questions you need to ask to help you make an informed decision.
Additional Reading: 8 Reasons Why You Should Buy Life Insurance
Before taking a decision, ask the right questions.
Questions you should ask before making a financial commitment.
- What am I buying?
- How much cover do I need?
- What do I need to pay and for how long?
- What are the benefits of my insurance policy?
- What should I keep in mind while filling the application form?
- What kind of malpractices should I be aware of?
Q. What am I buying?
A. Life Insurance is meant to protect your family’s financial future against uncertainty. It not only gives you a risk cover, but also empowers you to fulfill various needs like:
- Wealth Creation: To help you in achieving your financial aspirations and goals.
- Children’s Future: To help you secure your children’s future, by helping you plan for their education, their marriage and their dreams.
- Retirement: To help you maintain your lifestyle in your golden years.
- Savings: To help you live in the present with confidence since your tomorrow is secure.
Q. How much cover do I need?
A. Your cover is the extent of protection that your loved ones will receive. Simply put, it’s the funds that your family will need to maintain their lifestyle in your absence. A few simple questions can help you find out what is the right cover for you.
- How much of the family income do you provide?
- How many people are financially dependent on you?
- What are your current liabilities?
Additional Reading: All About Human Life Value
Q. What do I need to pay and for how long?
A. You will need to pay premiums, the amount that you invest for your policy, regularly for a specific time period known as the ‘Pay term’ which depends on the type of policy you purchase.
You can opt for ‘Single Pay’ which requires you to pay a one-time premium or ‘Regular Pay’ where you need to make multiple payments.
A regular pay term can be monthly, quarterly, half-yearly or annual. Your pay term is different from your policy term which is the tenure of the policy. Make sure you determine the policy term and the pay term before signing up. Only commit to what you are comfortable committing to on an annual basis over the long term.
Q. What are the benefits of my insurance policy?
A. The sales brochures and other promotional material can help you understand the benefits of your policy. Always ask for the policy literature provided by the insurer. Your policy benefits depend on the type of policy you chose such as Term Insurance, or a Unit Linked Insurance Plan.
It’s always advisable to read and understand the risk factors, terms and conditions of the plan. When in doubt ask your advisor to explain the details or contact the insurer.
Additional Reading: What Are ULIPs? Should You Invest In Them?
Q. What should I keep in mind while filling the application form?
A. Verify all the policy details before signing up for your policy. It is in your interest to provide correct information regarding your personal, medical and contact details to ensure smooth policy processing and a hassle-free claim processing in the long run.
While filling the form, always remember to:
- Check and fill the necessary details by yourself and only then sign.
- Ensure that your details match the KYC documents submitted by you.
- Complete the nominee details and inform your nominees.
Q. What are the malpractices I should be aware of?
A. Always keep in mind the following:
- Do not fall prey to promises of guarantee unless specifically mentioned in the product material.
- No insurer can offer rewards or discounts on a policy purchase
- Always check the advisor license if he has not been referred to you
- Inducement to purchase insurance is illegal, in case you come across such instances immediately inform the nearest police station and lodge a complaint against the person.
There you have it! Pretty much everything you need to know before purchasing an insurance policy. Keep these tips in mind so that you get the best possible policy that suits your needs and requirements.