The importance of a life insurance policy cannot be overstated. If the life assured passes away during the policy term, the insurance company will offer a payout to the nominee. This payout can help the life assured’s dependents pay for the various financial needs that may arise in their lives. Further, based on the type of policy you purchase, life insurance policies can also serve as an effective investment/savings instrument. Considering how important it is to have a life insurance policy in your financial portfolio, we have listed a few points that you should consider before purchasing a life insurance policy.
- Type of Product: Life insurance companies offer a range of life insurance products such as term insurance plans, whole life insurance plans, unit-linked insurance plans (ULIPs), endowment plans, money-back plans, etc. Based on your coverage needs, financial needs, and financial goals, you can opt for any one of these life insurance products. For example, if you require life insurance coverage but do not want to pay hefty premiums, you can opt for a term insurance policy. On the other hand, if you want your life insurance policy to give you returns, you can opt for a unit-linked insurance plan, endowment plan, or money-back plan. Make sure to carefully assess your coverage needs before opting for a particular type of life insurance product.
- Sum Assured: Next, you will need to decide how much to opt for as the sum assured. The sum assured is what will be paid to your nominee in case of an unfortunate eventuality. Thus, it is necessary to opt for a sum assured that will provide sufficient financial protection to your dependents. Make sure to take your current income, savings/investments, monthly expenses, and the needs of your dependents into account when deciding the sum assured.
- Insurer: It is necessary to carefully consider which insurance company to purchase the policy from. Make sure to look into the background of the company, online reviews, customer care channels available, claim settlement ratio, grievances solved ratio, etc. You should ensure that you only purchase a policy from a company that is registered with the Insurance Regulatory and Development Authority of India (IRDAI).
- Channels of Purchase: You can purchase a life insurance policy through online or offline channels. Purchasing insurance policies online is a simple and hassle-free process. Further, since there is no agent/middle man involved in the process, it is likely that you will be offered a lower premium quote, as well. Individuals who wish to purchase a life insurance policy online can do so through the official websites of insurance providers or through trusted third-party insurance websites. That said, you can always choose to directly visit a branch of an insurance company and purchase a policy from the insurer.
- Policy Term: When you purchase a life insurance policy, you will be offered life insurance coverage during the policy term. It is, thus, necessary to opt for an accurate policy term. For most individuals, opting for a policy term for the duration of their employment years should suffice. However, if you have liabilities or debts that will require repayment even during your post-employment years, you should make sure to opt for a suitable policy term accordingly.
It is necessary to do your due research before purchasing a life insurance policy. Make sure to familiarise yourself with the features, benefits, and terms and conditions of a few different life insurance policies and compare the premium quotes of different insurance policies. This will help you purchase a life insurance policy that offers you sufficient coverage at an affordable price.