7 Things You Must Know Before You Buy a Life Insurance Policy
Life insurance is a combination of caring, commitment, and common sense. – Howard Wight
Life is unpredictable, and no one knows when rainy days can come.
This uncertainty can make you worry about your family’s future. Home loan, child’s education, older parents are some of the top financial responsibilities that do not let you enjoy a stress-free life. Life insurance policies are one of the good ways to shield your family against unanticipated rainy days. After all, Life Insurance Plans are an indispensable part of any sound financial planning.
Looking at the number of life insurance companies and their products, the options are just endless. The insurance industry is flooded with life insurance quotes, term insurance plans, child plans, online life insurance, and similar options. Buying Life Insurance has become a matter of only a few clicks. While it’s always good to have a variety to choose from, the abundance of options might as well confuse and hinder you from buying the best insurance policy. The financial future of your family in any uncertain situation depends highly on this crucial decision of yours. So, to take it wisely here are a few things you must know before you buy a life insurance policy.
1. Life insurance is not an investment tool
Don’t mix your investment with insurance – one of the crucial financial lessons many people are unaware of. Life insurance gives you coverage in unfortunate incidents. On the other hand, investment makes your money grow and multiply. If you use life insurance for investment purpose, your investment expectation can never be fulfilled. Both - Insurance and investment are a vital part of a sound financial plan, but both should be handled separately. Still, if you wish to invest your money through insurance, ULIPs make a good option.
Also Read: How term plan works?
2. Coverage you need
How much coverage do you need to fulfill your family needs if something uncertain happens to you? Assess the coverage required before choosing a life insurance policy. Consider the inflation to finalize the coverage amount your family will need in the future. Also, consider your future financial goals – pay off home loans, children’s education, marriage expenses, medical expenditure, emergency fund, EMIs, etc. All these factors will help you decide the right coverage amount.
3. Premium frequency
The next step is deciding how often you can pay a premium. Almost all life insurance companies offer a range of payment methods for premiums– pay the entire amount in lump sum, pay at regular intervals – monthly, quarterly, yearly. Choose what is most convenient for you.
4. Life insurance riders
Even if there are thousands of policies available, there is no one-size-fits-all. The needs of insurance buyers vary. However, the good things are add-ons, known as riders, can be availed on any policy to customize it for your needs. You can avail riders for different purposes, like critical illness, death accident, income benefits, etc. Choose them wisely as you are charged for every additional service. It is wise to ask them before you purchase a policy.
5. Compare policy
Once you have assessed all the points, mentioned above, it is time to decide where to buy life insurance. Compare different policies by different companies. You can also compare online life insurance, offered by every company. Get as much information as you can about the policy. Once you have done your homework, choose the best option for your family.
6. Tenure of the policy
The longer is the policy tenure, the more premium you have to pay. Tenure plays a significant role at the time when you purchase a life insurance policy. So, decide wisely.
Also Read: Why you should not let your policy lapse
7. Mention everything on the application
Insurance contracts are the most common type of Principle of Uberrimae Fidei or Utmost Good Faith – a legal agreement requiring the highest standard good faith. When you are getting insured, you must disclose the complete, true information regarding every matter of insurance. Being an insurer, your liability can get legally canceled in case a fact is omitted, hidden or manipulated.
Now, as we have equipped you with all the necessary information you must know before buying a life insurance policy, it is time to choose the best one for your family. In case of any queries or doubt, feel free to ask Alisha.Related Blogs: How to find a Term Insurance with Adequate Sum Assured and Less Premium? Why Life Insurance may not seem important but actually is?