7 Things to Consider Before Buying a Life Insurance Policy

Before buying a life insurance plan, the first thing to consider is your family's insurance needs. The amount your family will need to continue living the same lifestyle and meet their future expenses in case of your untimely death should be your sum assured. There are various ways to calculate the required insurance cover, and hence, there is no ideal figure to be specific. However, these are the 4 most effective strategies that are widely used to calculate insurance coverage.

• Human life value

• Income replacement value

• Expense replacement

• Underwriters thumb rule

Click here to know how to calculate the required insurance coverage using these methods. Ideally, your life coverage should be in line with your family's future financial goals, present household needs, future household needs, and future lifestyle expenses. Buying a Life Insurance Policy without understanding your family's needs will either make your family suffer financially with an underestimated coverage or make you pay huge premiums for a longer duration with an overestimated coverage.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds

2. The Policy Tenure:

While buying a term plan just for your family's financial protection, it is necessary to choose the maximum policy term to ensure your family is protected without any gap. Similarly, when buying a life insurance plan (insurance-cum-investment) for a specific financial goal like your child's education, marriage, your retirement plan, etc. you need to choose the right policy tenure.

3. Choose the Right Insurer:

Many people buy a life insurance plan, especially a term plan, from any insurance company that offers them the maximum coverage for the lowest premium. However, choosing the insurance policy merely on the basis of the premium might not prove to be a good decision. It is advisable to do thorough research before buying the policy by comparing different plans with its offerings, benefits, claim settlement ratio, claim settlement process, ease to purchase and renew the policy, company reputation, customer service, terms and conditions, etc. along with the premium. An insurance plan that proved to be right for your friend or relative might not be the best for you. Hence, doing research and choosing the best-suited option is a crucial step for buying life insurance.

4. Choose the premium that you can afford to pay for a longer duration:

Life insurance is a long-term commitment. Therefore, you have to be careful when choosing the insurance plan and sum assured. The premium that you can afford to pay for this year might become a financial burden in the next year. Hence, it is important to consider your future financial stability when choosing the premium amount. Besides, there could be a gap between the insurance cover required by your family and the premium that you can afford to pay every year. In such a case, you have to find the balance and choose the right amount of sum assured and premium.

5. Relevant Riders and Add-ons:

The life insurance policies offer several riders and add-ons, apart from the basic death benefit, that can be purchased for an extra premium. These riders and add-ons protect your family from multiple risks. Some of the most useful riders and add-ons are:

• Accidental death benefit rider

• Critical illness rider

• Waiver of premium rider

• Child support benefit

• Guaranteed insurability rider

• Accidental disability rider

• Return of premium rider

• Family income benefit rider

6. The Claim Settlement Process:

The claim settlement process is another crucial factor that many of us ignore when buying a life insurance cover. In case of the sudden demise of the breadwinner of the family, their family members go through emotional and financial turmoil. A quick and easy claim settlement process will help reduce the family's financial stress. There are incidents where family members give up on insurance claims due to the tedious claim settlement process. Such a policy is of no use as it will not serve the purpose of having a life insurance cover to protect your family. Apart from a claim settlement process, you should also consider the claim settlement ratio of the insurance company. It will give you an idea about the total number of claims successfully settled against the total number of claims received by the insurer. A consistently good claim settlement ratio is an indication that the company is doing its job of paying the death claims to the nominees.

7. The Right Payment Mode:

There are several ways through which you can pay your life insurance premium. It is advisable to choose the online auto-payment mode for premium payments as it will ensure you pay all the premiums on time. Timely premium payment is necessary to get a continued insurance cover without any disturbance. In the case of an offline mode or non-auto-payment mode, there are chances that you forget the premium due date that can result in late payment fees or even a lapse of the policy.

To Conclude:

Buying a Life Insurance Policy for the first time can be overwhelming. But, the time you spend understanding your requirements and doing thorough research to find out the right insurer and suitable policy is worth it. It is advisable to buy an online Term Plan for life coverage instead of investing in an insurance-cum-investment plan. There are many other investment options that can take care of your long-term financial goals. Furthermore, make sure you carefully read and understand all the features, benefits, terms and conditions, list of exclusions and inclusions, policy exemptions, etc. to avoid any disappointment or dispute in the future.

Warm Regards,
Ketki Jadhav
Content Writer