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Buying life insurance is one of the bigger financial decisions in life. It should be done after careful consideration. Before you buy a life insurance policy, here are a few questions that you should ask and find solutions to.
1. Why do I need life insurance?
Answering this question can help you figure out your financial goals, as well as check where a life insurance policy fits within your scope of the future. Why are you looking to buy life insurance? It can be for one of many or various reasons. For example, you may feel the need for life insurance because you became a parent recently, or because your parents have retired. You may also want a life cover because you have recently taken a home loan.
Consider the various life insurance benefits and only proceed to buy life insurance once you know why you seek such a policy.
2. What type of policy suits me?
There are a number of life insurance policies available today. Some of the commonly available ones include term life insurance plans, whole life insurance, endowment plans, and ULIPs. Different life insurance policies offer different life insurance benefits. Each one will suit a different set of requirements. Thus, before you buy a plan, it is important to browse through the various policy types. Choose on the basis of what you are looking for and which plan can offer it to you.
3. Is it the right time to buy a life cover?
This is one of the most important questions one may forget to ask oneself. It is often advised that one should buy a life insurance policy as early as possible in life. In your early 20s or early in your career is considered to be a good time to buy a life insurance plan. This is mostly because the premium rates tend to increase as a person grows older.
However, it is also necessary to ask yourself whether buying a life cover right now is apt for you. It should be a financially sound decision, i.e., your life insurance premiums should not become a financial burden to you.
4. What should be my sum assured/coverage?
When buying a life insurance policy, the sum assured is one of the most significant things to consider. It is the amount by which one may determine the benefits that one may receive. You may come across the recommendation that your sum assured should be 10x your annual income at present. This allows you to offer a comfortable future to your loved ones and protect them from financial distress. However, it could be higher or lower if you wish.
Before you buy a plan, use a life insurance calculator to see how much premiums would you have to pay for the desired sum assured. This will help you choose a plan that offers a sum assured you like without having to burn a hole in your pocket. Online life insurance calculators are available on almost all insurance providers as well as third-party aggregator websites.
5. Which insurer should you choose?
There are a number of factors to consider when choosing an insurance provider. The company should ideally have a solid reputation for its products and services. Try to choose a company whose financial profile reflects stability and one that is known to offer reliable customer service.
A couple of other factors to consider when choosing an insurance provider are the claim settlement ratio and solvency ratio. The first value is an indicator of the number of claims successfully settled by the provider in the past year. The second is an indicator of whether the company’s financial abilities are enough to meet its long-term liabilities.
6. Should I buy online or offline?
This is a common dilemma many people may be facing. The common advice for this would be to consider an online life insurance policy, as they tend to be a little less expensive. However, at the end of the day, you should choose an option that is right for you. Know that the online process has to be conducted all by yourself. On the other hand, an insurance agent can help deal with the process of purchase and application for you. At the same time, their commission is taken out of your premium, thus making offline plans more expensive for you.
Once you have answered all these questions, you can zero in on the right plan for you and start using a life insurance calculator to get estimates. Once you have made the plan purchase, read the policy document carefully, understand all the features and processes properly, and pay your premiums on time.