What to keep in mind when buying life insurance policies

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HIGHLIGHTS

  • When determining life coverage, it is important to assess your liabilities, number of dependents, current and future income, and other factors such as your assets and any existing life coverage you may have. .
  • More than duration, consistency and discipline of premium payment is important, as the policy may expire before your financial obligations are met in the event that premiums are missed.
New Delhi: Life insurance is a staple in every individual’s wallet, as they recognize its importance in safeguarding the aspirations of their loved ones and helping them maximize their savings, achieve their financial goals and take advantage of tax exemptions. However, choosing the right life insurance plan for you can become complex as there are a plethora of options available.
Commenting on the important things to keep in mind when buying life insurance, Sandeep Mishra, Distribution Manager – Partnerships, Bharti AXA Life Insurance, said: “Covid-19 has reaffirmed that life can be uncertain, and hence he instilled the importance of life insurance in the minds of Indians.While opting for life insurance policies, the trick is to keep the financial responsibility/goal at the first plan and then aligning the right plan with the right stage of their life.This can be achieved by carefully considering factors such as sources of income, dependent members, debts, liabilities – all of which play a vital role to enable individuals to achieve their personal and professional goals in a planned manner.

Here are some other factors to keep in mind while buying a life insurance policy-

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Amount of life cover

When determining life coverage, it is important to assess your liabilities, number of dependents, current and future income, and other factors such as your assets and any existing life coverage you may have. . It is also crucial to understand the expenses of your dependents, for example, bills, school support for children or any long-term needs. A rule of thumb is to have a policy with a death benefit equal to 10 to 12 times your annual salary. However, a financial planner can help you assess the needs of your dependents and decide on adequate coverage.

Policy Duration

Seniority plays an important role when purchasing a life insurance policy as it has a direct impact on life goals. More than duration, consistency and discipline of premium payment is important, as the policy may expire before your financial obligations are met in the event that premiums are missed. In my opinion, the recommended duration of a life insurance policy should not be less than 10 years, because it takes time for the money to grow and give you the desired results.

Coverage and additional benefits

All human beings have these 3 great risks: 1) Risk of dying early, 2) Risk of living too long and 3) Risk of being diagnosed with a disease (risk of morbidity). While a life insurance policy helps you effectively manage the first two risks, the 3rd risk can be managed using endorsements/top-ups. You can opt for additional add-ons or benefits with the basic coverage, such as Critical Illness Rider, Accidental Death Rider, Waiver of Premium Rider, Accidental Death Rider, disability, etc., which can be purchased by paying nominal premiums at the time of policy issue. These options help enhance your policy’s benefits and coverage.

Life insurance company references and claims experience

The claims settlement ratio shows the total claims paid by the company compared to the number of claims it has received. A healthy claims ratio (ideally above 90%) indicates that the insurer is credible and trustworthy. It is also important to note the credentials and track record of the insurer before making a purchasing decision.

Individuals can keep these factors in mind before taking the plunge and opting for life insurance to ensure a smooth and hassle-free experience. There can be many factors that can help you choose a life insurance policy or prevent you from going for it, but remember the golden rule: “The best time to buy a life insurance policy life is when you don’t need it. Because when you need it, you won’t get it.

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