Sceptical if buying a life insurance policy can really be useful in the long run? Asking these 5 questions before buying a policy can make life insurance your lifeline!
Life insurance is the most imperative financial instrument to protect the long-term finances of your family. No matter if you’re in the early stage of your career or in its final era, you shouldn’t avoid the significance of life insurance. Without this protective cover, all your financial plans may be half-baked.
You may be seeking good insurance and investment products to save some taxes. However, it is often suggested, that you should not be in a hurry to buy insurance policies without doing your due diligence.
Long term commitment…
Life insurance plans are a long commitment, and thus, you should only buy one after you’re assured that your financial interests will be taken care of in the long run.
Obviously, having an adequate cover of life insurance in your financial portfolio is necessary. You can buy insurance not only as protection but also to fulfil several financial goals such as wedding plans, your child’s education, or buying a house, etc. Hence, it becomes mandatory for you to know the conditions and provisions of every life insurance plan.
Before you buy a life insurance cover, you must take the following things into consideration:
• Your liabilities and your income
• Number of family members
• Current and expected future inflation rates
• Essential expenditures in the future
• Choosing the beneficiary
• Deciding the suitable policy term
• Selecting reliable insurer
Below, we have mentioned 5 questions that you should answer while you buy a life insurance cover for yourself.
1. Do you know the Purpose?
Many of you buy an insurance plan just to save and do not pay attention to the fact that the life insurance policy is primarily bought to act as a financial cushion to protect your family. A life insurance plan assists in protecting your dependents and loved ones, along with your other future liabilities, when you’re not around. An insurance plan’s primary objective is not to offer tax benefit only, rather it is an additional benefit that every individual enjoys after buying a life insurance cover to safeguard their loved ones and family.
2. Have you calculated you Insurance Cover?
Often you end up buying the wrong life insurance policy that offers you the highest insurance coverage, without calculating whether you need that amount of cover at the time or not. It is imperative to compute overall expenses over a year. Hence, you must buy a life cover accordingly; else, you may have to pay a very high premium.
3. Did you really need the Policy you bought?
Are you looking for a ULIP plan? Or, are you seeking a term insurance policy to safeguard your long-term liabilities? It is necessary for you to know which policy will best suit your needs and requirements so as to cover all your financial liabilities. ULIP is an amalgamation of investment and insurance, usually offering the dual benefits of protection and growth. On the contrary, an endowment plan invests in a low-risk tool and provides assured maturity benefits but these plans offer lower returns in comparison to ULIPs.
4. Are you aware of the Premium Paying Term?
For every single insurance scheme, you have to make a regular payment of a pre-determined amount of premium. Every plan has a different premium paying term depending on the policy. Your premium paying term can be annual, quarterly, or monthly, and thus, you will have to ensure that you don’t miss the date or forget the exact sum of money you’ll need to pay for your life insurance scheme. In case of a non-term scheme, you can compute the returns that you may receive on the survival of the policyholder.
5. Do you know the Claim Settlement Ratio?
Before choosing an insurance company, you must know its claim settlement ratio. You should find out whether the insurance company is trustworthy and settles its insurance claims without delay or not. The ratio of claims approved to the total number of filed claims is called Claim Settlement Ratio (CSR). Hence, if you know the CSR, you can decide on a suitable insurance company and life insurance plan.
Wrapping it up!
Now, that you’re equipped with the five basic questions that you should ask before selecting and signing a contract with an insurer, ensure that you purchase a life insurance policy sooner than later. It won’t take you a lot of time to buy life insurance, but it’ll take just a moment to lose all your savings.
