A life insurance policy offers triple benefits of life cover, tax-savings, and investment. Today, there are different types of life insurance plans available in the market offered by public and private insurers. Thanks to digitization, it’s easy to buy insurance these days. However, there are certain things that you must be aware of while buying life insurance.
1. The purpose of buying
Before buying a life insurance policy, it’s important to know the purpose or goal you want to achieve with it. Note that each policy serves a different purpose. For example, if you want a large financial cushion at affordable premiums, a term plan is your best bet.
On the other hand, if you want a life cover with an investment component to build a corpus for various goals, you can avail unit-linked insurance plans (ULIPs). Similarly, if you are looking for life cover with maturity benefits, you can opt for endowment and money-back plans. Opt for a policy that best serves your needs.
2. Sum assured offered
This is another essential lookout before purchasing life insurance. Sum assured refers to the amount that your nominee would get on your behalf in case of any untoward incident. It’s essential to opt for an amount that would help your family meet its present and future obligations and maintain the standard of living.
The sum assured must also factor in the loans you are serving. This is because the onus of repaying the loan, in your absence, would be on your family members. Therefore, it’s prudent to opt for a high sum assured.
3. Riders available
Riders are add-ons that you can attach to your base policy for more comprehensive coverage. They provide an amount over and above the sum assured, as mentioned in the policy. Though availing them increases the premium slightly, they come handy in times of need. Some of the most common riders available are:
- Accidental death and disability rider
- Waiver of premium rider
- Family income benefit rider
Find out the different types of riders offered by the insurer and choose as you deem fit.
4. Claim settlement ratio of the insurer
This ratio refers to the total number of the claims approved by the insurer as against the claims received. For example, if the claim settlement ratio of an insurer is 80%, it means that the company has settled 80 out of the 100 claims received. Higher the claim settlement ratio, the better it is for the policyholder.
This ratio is published every year by the Insurance Regulatory Authority of India (IRDAI) and is also available on the website of the respective insurer. It is prudent to avail – for obvious reasons – a life insurance policy from an insurer who has a high claim settlement ratio.
5. Filling up the proposal form with correct details
Before buying life insurance in India, you need to fill up a proposal form. Make sure you fill it with the utmost care, without mistakes. Provide accurate details about your identity, income, and prevalent health conditions. Also, if you have any existing policy, do mention its details in the form.
Should the sum assured of a policy be high, you’d need to undergo medical tests at the insurer’s cost. Don’t skip these tests as they might reveal a condition that you may not be aware of. Concealing information can lead to claim rejection later.
To buy the best life insurance plan, make sure to compare offerings from multiple insurers. You can easily do it from insurance aggregator portals that list different products. You can read reviews and talk to experts to make an informed choice. Note that irrespective of whether you buy an insurance policy online or offline, you’d have to pay premiums on time to prevent lapsation and enjoy the plan’s benefits. Life insurance policy payment can be done through cash, cheque, and demand draft or online.