Choosing a larger than life cover, step by step

Published: March 31, 2015 12:04:11 AM

Most PROSPECTIVE buyers of insurance are not sure as to which policy would be appropriate for them...

Most PROSPECTIVE buyers of insurance are not sure as to which policy would be appropriate for them. Here are some easy ways to find one that suits your needs best.
* Step 1: What do I need?

The decision to choose a life cover depends on the financial needs of your family. Your decision will be influenced by the following:
a) Current family income and expenses. What portion of income will stop if you are not around?
b) The lifestyle that you want for your family even if you are not around. This can be calculated by adding all monthly expenses.
c) Money that you will need for future needs, such as children’s education, house rent, retirement and loan repayment.
d) The inheritance you will leave for your family, such as a loan-free house, savings etc.
Answering these questions will help you analyse and identify your insurance requirements.

* Step 2: What type of product is suitable for me?
Life insurance products offer financial security in a structured and disciplined way. These products can help an individual meet the dual needs of saving for the future as well as protection during unforeseen circumstances. These products offer more than just pure risk cover — they
provide options that give you market-linked or guaranteed returns, or moneyback on key milestones.

You can buy a life cover by paying either a very low premium that offers no returns, or higher premiums that offer the benefit of savings and investments. Savings-oriented policies help you save for the long term systematically. Higher premiums may bring you additional tax benefits with a savings-oriented plan.

Before you select a plan, you need to understand the amount of risk that you are willing to take on your investments. In unit-linked plans (Ulips), the investment risk is borne by you; however, there is also an opportunity to earn higher returns. In traditional plans, you can receive steady returns without much investment risk. Choosing the period of premium payment completely depends on the individual’s capacity and commitment to pay during that period.

Many life insurance policies offer options to pay just once, or for a defined period, or regularly during the policy term. The shorter the period, the higher the premium for the same benefits. It completely depends on how long you would like to commit to pay the premiums.

While you decide what’s the best option for you, also look at options to enhance your cover with additional riders for disability due to accidents or critical illnesses. These riders can be added at a nominal cost along with such plans.

* Step 3: Short-list, select
After you have selected the type of policy, choose a product falling within your identified list of policies. Insurers’ websites can be used as a platform to get the required product details.

For further understanding, the helpline number or a request for an adviser can be useful. Once the insurer has been decided, its adviser can assist you with the information through a detailed presentation. This will help you identify your needs and choice of the product. This will also help you understand which product is more beneficial and offers better value.

After all the hard work, you should buy the product that is most suitable for you. Self-assessment of needs, researching various plans and taking professional advice are the three key factors for selecting the right life cover.

By Munish Sharda

The writer is MD & CEO, Future Generali Life Insurance

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