MUMBAI: Just like a safety net, life insurance can protect your loved ones from any financial burden if something happens to you. If you pass away while the insurance is still in effect, the insurance company pays your designated beneficiary a set sum as a death benefit.
Depending on the type you choose, life insurance has additional advantages. Here are a few vital factors to consider before purchasing because selecting the right coverage is crucial. So, let’s start.
Determine How Much Insurance Coverage You Need
Several financial analysts and consultants advise getting term insurance coverage at least ten to fifteen times your yearly salary. However, this estimation leaves out certain details.
Your family might be unable to make the payments while you're gone if you have unpaid loans. Furthermore, inflation may impact your loved one’s ability to spend money. So, have an understanding of the following to determine how much life insurance you need:
● Your family's yearly expenses and the time that income replacement is required.
● Any unpaid debts as well as the mortgage repayment expenses.
● What you must set aside for your child's future.
Subtract all investments and liquid assets (i.e., cash on hand or in the bank) from all your estimated expenses. You will now have the recommended level of life insurance coverage.
Pick The Right Insurer
Several people get a life insurance policy, particularly a term policy, from any insurance provider that provides them with the most coverage at the most affordable price. However, selecting insurance coverage based solely on cost may not be the smartest decision.
Before purchasing insurance, conducting extensive research and comparing various aspects is advisable. This includes the plans' features, premium, claim settlement ratio, claim settlement procedure, ease of purchase and renewal, company reputation, customer service, terms and conditions, etc. Choosing the best one that fits your needs after doing research is essential.
What Happens If You Don’t Die
Interestingly, some people feel concerned over the possibility that there might be no rewards if they live till the policy maturity. If you're also bothered by this, talk to your agent about it and find out what happens when the term draws to a close.
There are occasions when you can choose to increase the coverage term under your insurance, but doing so might cause your premium to increase significantly. In such a case, you can purchase a life insurance policy with maturity benefits. To ensure maturity or survivor benefits when the policy matures, you can choose a term plan with a return of premium.
Type of Life Insurance Policy
Life insurance policies come in various forms, each with unique benefits. After determining your needs, you must decide which coverage best suits your wants and objectives. This is a quick rundown of the kind of policy that corresponds with your typical financial objectives.
| Type of Insurance Policy | When To Choose |
| Term life insurance | Even if there are no maturity benefits, you should still get an inexpensive large life insurance policy. |
| Child insurance plan | If you would like a life insurance policy that corresponds with your child's significant life events, such as marriage and education |
| Unit Linked Insurance Plan | If you wish to combine life insurance and investing advantages into a single plan |
| Annuity plan | If you need to choose a life insurance policy that also provides benefits for retirement |
| Endowment life insurance | If you'd want life insurance and savings benefits combined into a single plan |
| Whole life insurance | If you wish to benefit from coverage up until the age of 99 |
Check The Policy’s Terms and Conditions
You must consider additional terms and conditions of a life insurance policy. For instance, evaluate the grace period provided if premium payments are delayed. See if there is a waiting period associated with this. Review the other policy provisions, such as surrender value, surrender charges, nomination, and loan availability.
Learn About The Add-On Riders
Usually, you can add riders when you purchase your life insurance policy. Depending on the kind and insurance provider, a policy may include a variety of riders. These riders come with extra coverage and benefits over and beyond what your standard plan provides; you only have to pay a small additional fee.
Right Payment Mode
You can pay your life insurance premium in several ways. It is best to use the online auto-payment option for premium payments since it ensures you pay all the premiums on time.
To maintain uninterrupted insurance coverage, timely premium payments are required. It's possible that you won't remember when the premium is due in an offline or non-auto-payment option, which could lead to late fees or a policy lapse.
Conclusion
The first time you purchase a life insurance policy might be very intimidating. Nevertheless, it is worth the effort to thoroughly research your needs and choose which insurance would provide you with the best coverage.
You can achieve your long-term financial objectives with various investing strategies. For added peace of mind and to prevent future disappointment or disputes, study and analyse all the features, benefits, terms and conditions, list of exclusions and inclusions, policy exemptions, etc.
