This begs a very pertinent question. Why life insurance and why the big fuss about it. Well, it creates a solid financial foundation for your loved ones in dire situations of death so that they can continue living an acceptable lifestyle and are not left in the lurch. It becomes quite obligatory on the part of the bread earner of the family to have a life insurance so that the dependents don’t suffer financially after they are gone.
Although it’s an omnipresent word, there is a lot of confusion surrounding life insurance and life insurance plans which best fits the need and requirements of an individual. Therefore, it becomes imperative that one is armed with the best possible knowledge about plans to make an informed decision which best fits you and your family.
Life Insurance Is a Tool for Risk Mitigation, Not Investment
Life Insurance plans can provide tax privileges under section 80C, but on a broader level, they cannot be branded as an investment tool. There are four major players in an insurance policy namely insurer, owner, the insured and the beneficiary.
- The insurer is the insurance company,
- The owner is the person who pays the monthly/yearly payments,
- The insured is the person on whose life the policy is based
- The beneficiary is the claimant in case of an unfortunate incident of a death of the insured. The owner and the insured can be the same person.
The Most Prevalent Life Insurance Policy Types
You are spoiled for choice when it comes to life insurance plans and their insurers and from these myriad choices germinate the seed of confusion and indecisiveness.
Life Insurance Policies One Too Many Online So Let’s Break The Life Insurance Policy Information Into Two Broad Categories.
- Term Policy: The insured selects a certain term, it could be 10,20 or 30 years during which time he pays a premium and is covered. If the insured passes away during this time the beneficiary gets the lump sum amount of the policy. If not, then it’s great news.
- Permanent or whole life policy: The policyholder keeps paying the premium until his death upon which a corpus is remitted to the family. There are few policy variants to this life policy which delve into savings and funding in mutual funds.
How to Make the Right Decision in The Midst of Innumerable Choices Online?
The common dilemma among the prospective policyholders is what to choose, how to choose it and what are the things to keep in mind?
Choices Galore and Spurious Agents Ready at Every Corner to Pounce On Untrained Eyes.
Among the many tips, the top 5 which makes the grade against which the policy should be bought and measured are:
- The need to buy insurance: you need to decide why you want to buy insurance otherwise you will end up paying premiums on unwanted and futile products which will empty your coffers with no benefits at the end of the day.
- No dependents: Go for a good Mediclaim or health insurance policy.
- Dependents: Go for a life insurance policy.
- Read the terms and conditions carefully like ‘free look’ period, option to increase death benefits, etc.
- Coverage or Sum assured: This is a critical step as at the end of the day this is a payout figure which a beneficiary receives.
- Never underinsure yourself
- The sum assured should be around 8-10 times your gross annual income.
- Always add your debts to reach a conclusive sum assured figure.
- Choose the riders carefully as they come with additional cost.
The most common riders are:
- Accidental death benefit
- Critical illness rider
- Accidental benefit rider
- Waiver of premium rider
- Don’t go for policies which propagates the combines value of investment and insurance in one plan.
It’s always advisable to go for term plan policies to keep it simple. There are lots of other policies like money back policies, whole-life, and endowment plans which involve products with multiple benefits but at a very high premium.
Thumb rule: Go for high claim ratio policy
- Always compare and then decide: The decision of buying an online life insurance plan should be set against your requirements and not the other way around. Your family’s safety should be paramount when it comes to making that final call. You can always hire a financial planner advisor and refrain from any insurance agents as they are often on a look out of their commission.
The Final Word On Online Life Insurance Policy Investments
You invest your hard-earned money into a product which you foresee of giving your family a good quality of life after you are gone. Therefore, it is imperative to go with an insurer which is in it for a long run and promises a hassle-free claim.