EDITIONS

How to choose the best life insurance policy

Bindhu b
22nd Jan 2018
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Buying a life insurance policy is crucial for every breadwinner. His/her untimely death might leave the family in a tough financial situation. It is therefore imperative to plan in advance to support one’s family members during such crisis situations.

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The presence of online aggregators has made the purchase of life insurance policies simple. You can view the features and buy the policies at the click of a button. Here’s what you should bear in mind before you choose the policy:

Analyse your needs

You should calculate the cover you need based on which stage of life you are in when you choose to buy the life insurance policy. You would have to consider the number of dependents you have, their financial requirements, other sources of income, etc. The sum assured should be enough to support your family members until they can manage their expenses.

Making specific goals might help you ascertain the cover you need. You could list out your current requirements, expenditures you incur on a monthly basis, etc. For instance, your child might be in preschool when you buy the life insurance policy. Ideally, you should find out the approximate education costs right up to graduation. You might have to add a few extra thousands to balance out the possible inflation. Calculating the rest of your requirements likewise will help you get a clear picture of the sum assured you will need.

Pick the one with the longest term and more benefits

In the case of whole life insurance policies, there will be a payout when the life assured dies. But in the case of term life insurance policies, there will be a payout only if the policyholder dies during the specified term. Hence, if you’re buying a life insurance policy early in life, it would be better to choose a whole life insurance policy or the one that offers the longest term.

Apart from whole life insurance and term life insurance, there are endowment plans, ULIPs (Unit linked insurance plan) and money back policies.

Endowment plans are basically for a specified term and they offer a maturity benefit. The sum assured can be availed along with maturity benefits.

ULIPs are a unique combination of insurance and investment. The sum assured can be claimed either on death or maturity, with the insurer also providing the policyholder the option to invest in funds.

Money back policies offer regular payments. On the death of the life assured, the beneficiary will receive the sum assured. Most money-back policies also provide survival benefits during the policy tenure.

Pick the right company

You should check the incurred claim ratio of the company i.e. the number of claims settled against the number of claim requests received. A higher ratio indicates that the insurance company is more likely to settle the claim smoothly. Verify the premium charges that have been imposed by the policy. Make sure they are affordable. Learn about the number of branches the life insurance company has so that the claim settlement process is easy.

It is important to consider these factors before deciding the best type of life insurance policy to buy. Stay informed of all the terms and conditions of the policy.

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