When choosing to make a long-term decision like purchasing life insurance, you must approach the matter as you would any critical life choice. Before you buy a vehicle, you must spend some time researching the types of cars available in the market, your personal preferences, discounts, and several other factors. Purchasing life insurance is also a decision that requires the same first steps—due diligence and research.
Gain a basic understanding of life insurance
Your friends and family members would have told you to buy life insurance once you started your professional life. While everyone knows it is essential to buy life insurance, most people may not know all the benefits they will receive with the right life cover plan. Before purchasing life insurance, it is essential to know about the different types of life insurance policies available in India.
For instance, a term life cover is a pure protection plan that offers you life cover in exchange for a fixed premium. Such a life cover plan offers no maturity or survival benefits. If you are only looking for life insurance to provide life cover for a specific period (till your child grows up or your home loan is paid in total), a term plan might be the right option for you.
On the other hand, if you are looking to buy life insurance products that will help you save for your short-term financial goals, an endowment plan might suit you best. An endowment life insurance plan provides periodic money-back payments, maturity/survival benefits, and life cover and death benefits.
Different plans serve different needs. Look through all the types of life insurance products to find the best solution to meet your needs.
Know your financial goals
There are two main types of life insurance plans—pure protection term policies and savings-cum-insurance plans. Before purchasing life insurance, you need to zero in on the specific financial goal you hope to achieve using the life insurance plan.
For instance, "I want to enjoy a comfortable retirement" is a goal that lacks specificity. Once you know your broad thrust area, it is time to jump into the numbers. A measured plan would be, "I want to create a retirement corpus of Rs. 50lakhs that will be ready for me to use in exactly 25 years in the form of guaranteed monthly income after my professional income stops." Specifying what you hope to achieve from your life insurance investment helps you reverse engineer your financial moves today.
Similarly, if you want to create a corpus for your child's educational needs, consider the cost of professional certification today and adjust for inflation. Then, break down how much you would need to put aside every month to meet your financial goal a decade later.
Assess your personal insurance needs
The research you conduct before purchasing life insurance should also factor in your personal needs. The amount of life cover you need depends on your overall contribution to the family's income, the number of financial dependents, and your current liabilities.
While purchasing life insurance, the aim is to ensure that the amount of life cover you buy is enough to provide for your family's needs after your death. The rule of thumb states that the sum assured should be at least 10-15x your annual income.
Choose your life insurance premium frequency
Before you buy life insurance, consider how frequently you would like to pay premiums. A single premium life cover plan only requires a one-time payment in a lump sum. Most life insurance plans offer multiple payment frequencies. You can choose to pay your premiums at a monthly, quarterly, half-yearly, or yearly frequency. Assess your financial wherewithal and future goals before deciding on a frequency that is the most convenient one for you.
Add beneficial riders
Life insurance policies are customisable to ensure that they meet the specific needs of the policyholder. There is no one-size-fits-all type of life cover plan. To meet the needs of investors from different walks of life, insurance companies offer several riders that can be added to your life insurance plan to enhance the basic benefits. These add-on riders include accidental death rider, accidental total and partial disability rider, and critical illness rider. Learn more about how these riders can help you before you buy life insurance plans.
Choose intelligent features
Life insurance companies offer many policy options and features that make getting and maintaining a life insurance plan easy. While researching life insurance products, look for these intuitive features to help you in the long run.
- Auto-debit facility: Check if your life insurer offers an auto-debit facility with a life insurance pla With an auto-debit feature in place, the company receives your premium automatically as it is debited from your account on a pre-determined date. This ensures that your premiums are paid regularly, and your policy is kept in force without any delays.
- Quick pay-out feature: Your primary reason for purchasing life insurance is to ensure the financial security of your loved ones in case of your demise. The last thing anyone wants is for your family members to suffer while the insurer takes 2-3 years to pay the policy death benefit. A life cover plan that is easy to qualify for but requires a waiting period of years to pay out the death benefit will be of little use to your loved ones. It is best to avoid such a life cover plan. Instead, look for a quick pay-out feature for your family's convenience and peace of mind.
- Conversion feature: Some life insurance policies may allow you to convert a term plan into a whole life insurance plan towards the end of the term plan tenure. With this conversion option, you can choose to extend your life cover plan after re-assessing your financial needs at a later date. In a term plan, you do not receive any survival benefit. By converting a term policy to a whole life plan, you can extend your life cover based on your needs at that time.
- Return of premium feature: A term plan with a return of premium feature works like a regular term plan but with added benefits. In such a life insurance plan, you enjoy life cover for the policy tenure, and your nominee gets paid the death benefit in case of your death while the policy is in force. The return of premium feature is what sets this plan apart from others. If you survive the policy tenure, this feature ensures that you earn maturity or survival benefits in the form of a return of the premiums paid for the duration of the policy.
Compare the right criteria
While purchasing life insurance, there are many ways to save your money and get a good deal. However, a low premium amount cannot be the only criteria to judge the effectiveness of the life cover plan. Compare and buy life insurance plans to fulfil your financial needs today, tomorrow, and in the decades to come.
Consider the features, benefits, premium payments, add-on riders, insurer's claim settlement ratio and process, and overall reliability of the insurer before you buy life insurance plans.
Purchasing life insurance need not be a confusing process. Before you buy life insurance, research the products, consider your needs, and zero in on a reliable life cover plan that is the best match for you. IndiaFirst Life Insurance features instant premium calculators so you can get a quick quote to protect your family without stepping out of your home. Enjoy the benefits of a fast process, various insurance products, and seamless customer service with IndiaFirst Life Insurance's online and offline life cover plans.
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