7 Tips to Consider When Buying a Life Insurance Policy

Life insurances are a must. Today, we cannot imagine life without insurances. Due to the occurrence of unprecedented events, getting an insurance coverage have now gradually become an indispensable need. One hardly requires to be reminded that a consumer who plans for the future should, in one way or another, take account of the fact that he does not know how long he will live. Earlier, insurances meant ‘life insurance policy’ in common, which addressed accidental deaths or untimely death owing to critical illnesses. However, insurance coverage now applies to varied domains like healthcare, vehicles, property, which includes land, home (real estate) or personalized shops and even corporate businesses. Many individuals also buy term insurance policies as it suits their need. But one must be prudent enough, prior to buying a life insurance policy. He should be aware of the terms and conditions laid by the insurance company before investing.

Few points should be kept in mind while buying a life insurance policy. These are crucial factors and should be determined judiciously, sometimes even with expert advice else, the customer might fall in distress later. Since, there are multiple plans available in the market, it is very important to select the optimum one which ensures the maximum benefit in the end. Here are seven common factors which should be considered while purchasing a life insurance policy.

  1. The Amount to be Insured

It is indeed important to decide the amount, the customer wishes to insure prior to buying an insurance plan. The customer should keep in mind his financial status and accordingly estimate the approximate premium amount to be paid to the insurance company to keep the policy running. A rough estimate can be obtained by using the online premium calculator available in the web applications of all leading insurance agencies. If needed, expert advice can be sought anytime from a leading financial service provider.

2. The Type of Insurance to be Opted Which Best Suites your Need

Once the customer is aware of the financials, the next step is to choose the policy type which best suites his requirement. Say for e.g., choosing among a permanent life insurance and a term insurance policy. The permanent policy ensures lifetime coverage whereas, a term plan has a lower premium amount and offers coverage for a specific policy period only (say 10 years, 20 years). It is a critical decision to judge the type of policy required based on the customer’s need.

3. What happens if the customer is unable to pay off the premiums?

Future can never be predicted. It might happen that the customer is unable to pay off the insurance premiums owing to certain financial crisis. Under such circumstances, if the insurer has chosen term plan, then his financial coverage will be immediately discontinued. If opted for permanent policy, then, the insurer has a choice to pay once the policy begins to generate cash value.

4. How will the policy perform?

This can never be ascertained in advance. For a permanent policy, the plan offers a cash amount equal to that which the insurance company invests on the insurer. Life insurance policies however, should always be treated as a source of financial security and never as an investment.

5. Is term plan policy convertible to permanent policy in future?

Insurance companies always provide the flexibility of converting one policy type into another, like term plan to a permanent policy up to a fixed age limit. These parameters should be discussed with the insurance companies well in advance, to avoid any ambiguity in future.

6. To Know which type of cases are covered under the insurance policy.

We are mostly of the common belief that insurance companies provide financial coverage to the beneficiaries of the insured, under events of the unlikely death of the insured member. It is to be kept in mind that insurance companies do not provide monetary assistance under events of death due to war, aircraft crash or suicidal cases.

7. Keeping an eye on the authenticity and credibility of the insurance agent/company

Customers should always check on the authenticity of the insurance company prior to investing. Cross-checking the license agreement of the company dealers/agents with the state authorities is important to verify, if the agents are authorized representatives of the concern. Insurance policies should always be bought from reputed and well-performing companies to ensure timely co-operation. Feedback and recommendations from existing policy holders are often very helpful in taking decisions.

It is not really appreciated if one thinks about death at an early age. However, it is always wise to plan beforehand and tactfully handle a crisis when the unexpected happens. The chances of securing our loved ones from financial stress are multiplied if we have an insurance in hand. Think smart, go for insurance. Now or never.

Author: Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.