While purchasing a life insurance policy, most people focus only on the quantum of premium they would have to pay, terms of payment and the amount of sum assured irrespective of the extent of protection that their dependents would need.
While purchasing a life insurance policy, most people focus only on the quantum of premium they would have to pay, terms of payment and the amount of sum assured irrespective of the extent of protection that their dependents would need. Secondly, people also tend to look at insurance as a kind of investment or tax-saving mechanism as opposed to a necessary protective life cover. In addition, the insured must realise that the insurance cover they intend to buy is not for themselves, but for the nominees whom they wish to make financially secure.
Make use of technology
Technological advancement has made it rather easy to purchase insurance even without the assistance of an expert. A large number of insurance plans of various public and private sector companies are now available online, and one can compare their features before deciding to buy a plan.
Following are the important factors that one must consider before purchasing a life insurance policy:
Need and quantum for life insurance
One needs to understand if there is really any need of life insurance, and if it is required, then what should be the quantum of sum assured as per the family requirements. Though the thumb rule clearly states that the sum assured must be roughly 10-15 times of the annual income of the insured, the amount of life insurance may depend on a host of other factors. These may include income earned from other sources, the number of dependents of the insured, the nature and extent of debts coupled with kind of lifestyle enjoyed by the family.
Don’t forget your liabilities
Protecting your family against unwarranted financial distress also involves foresight on how your dependents would address liabilities like bank loans, expenses towards children’s education, etc. Prior to proposing an insurance policy, one must take all family needs into account, and evaluate the extent of premium cover that would be needed. One must then buy the best possible plan that would suit his/her family needs while also guaranteeing a secure future for them.
Kind of insurance policy needed
There are different kinds of life insurance policies available in the market. In some cases, the premium may be fixed, whereas in others it may have to be doled out in varying amounts. The amount of death benefits also vary according to the type of insurance policy bought. So, you should choose a policy which suits your specific requirements, your long term goals, and it should be easy on your pocket, because once bought, you should be able to continue to pay the premiums regularly without any lapse.
Choose insurance plan wisely
It requires considerable consideration before choosing a suitable insurance policy. In an era where millions of people scout the internet regularly for reliable information, not otherwise available, people intending to take insurance policies can easily educate themselves about the ins-and-outs of life insurance, the nuances of various policies available, the difference between investment and insurance and the need to stop treating insurance only as a tax-saving measure. There is an imperative need to compare insurance companies based on parameters including their reputation, the quality of their customer service and claims settlement ratio. Wise decision-making depends a lot on informed choices one makes, thus lessening scope of regret in future.
The writer is head of life insurance, Policybazaar.com