Buying a life insurance policy is a crucial decision. Despite its importance, however, it is often overlooked. People commonly prefer to invest their money in buying a car than choosing the right insurance policy that will protect their families against eventualities.
Investing in the best life insurance policy in India is important because it protects your family members and dependents, in case something happens to you.
In this article, we will discuss the most important do’s and don’ts to buy a life insurance policy and ensure that you get the best product out there.
Don’ts of Buying Life Insurance Coverage
- Don’t just buy on the basis of price
While price is an important indicator, it should not be the key factor when you are buying a life insurance policy. There are many companies out there that offer you insurance plans but to know which one is better than the other, you need to assess numerous factors in conjunction with price. For instance, if there is health insurance policy A that costs Rs. 5,000 a year and there is policy B that costs Rs. 6500 but can be bought without a medical exam, which one would you choose? It all comes down to features and benefits with regards to cost. At the end of the day, you need to choose the one that offers you maximum benefit for minimal price.
- Don’t just pick any number for coverage amount
The sum assured of your life insurance policy should be able to meet all the expenses, existing liabilities, and future goals, without compromising on the current lifestyle. Therefore, you need to choose the coverage amount after careful assessment of your lifestyle, income, liabilities, assets, and future goals.
- Don’t sign the policy before reading the terms and conditions
Don’t be in a hurry to sign the policy document just yet. First you need to read all the terms and conditions, inclusions and exclusions, and seek clarification of all the terms you do not understand. Make sure that all the information is correct and that you understand every aspect of your policy.
- Don’t delay buying life insurance policy
You may not be ready to commit to life insurance just yet, and that is ok. But you need to understand that the sooner you invest in a policy, the better rates you will get. A young person’s insurance premium will be much lower than of a person in their 40s. In absence of a life insurance, you are exposing your loved ones to the grave risk of being left high and dry in case something happens to you. Therefore, you need to start assessing your options and invest in a policy as soon as possible.
Do’s of Buying Life Insurance Coverage
- Assess your needs
Even though life insurance policy is considered as one the most basic tax saving tips, it has much greater purpose than that. So don’t just buy a policy because you want to save taxes. Life insurance is a long-term investment that requires a lot of planning and commitment. Unless you know why you want the insurance, you will not be able to pick the right product for yourself. However, when you align your investment in a life insurance with your needs, it will help you see the right aspects and factors in a product before you purchase it.
- Evaluate your exact coverage need
When you are coming up with a coverage amount, you need to evaluate your exact needs. You can take help from an insurance calculator to calculate the right coverage amount as per your expenses, future milestones, and liabilities. The rule of thumb is to choose at least 15-20 times your annual net income as the coverage amount. This amount will not only pay for all the existing liabilities but also account for inflation over a period of time.
- Be realistic
You need to set the right expectations from your life insurance policy. If you are not someone who is in perfect health, then you need to prepare yourself to shell out money for premiums. Don’t be surprised if you do not qualify for the advertised rates. The important thing is that you should be absolutely honest in declaration of your lifestyle and health conditions. Not doing so will render you ineligible when filing for a claim.
- Review the insurance provider
It is necessary to review the insurance provider and their performance over the last few years. You must also check their claim settlement ratio to ensure that your money is indeed in safe hands. You should invest in a company that gives you more than 90% guarantee of settling your claims when you file for them. You can also check their financial history and overall reputation with the customers.
Buying the best life insurance policy in India is a crucial decision that you need to take after careful thought and assessment. So, compare your options and use these do’s and don’ts as the starting point for your research.
