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All about life insurance policy and tips to choose the best one

One of the financial decisions that you will have to make is buying a life insurance policy. This is not a choice and you have to buy a life insurance cover for yourself if you are the breadwinner of the family. A right life insurance coverage goes a long way in helping your loved ones maintain the standard of living, meet all financial needs such as children’s education and marriage and even your spouse’s old age requirements even after your demise.

In this article, we will see what a life insurance policy is and how to pick the right one that will fit your needs.

Life insurance policy

A life insurance policy is a contract where the insurer pays the insured an Assured sum in the event of his/ her death or on the maturity of a policy. This contract also mentions that the insured pays all the premiums for the policy as per the contract.

Basic advantages of life insurance policy

  • Financial freedom and security to your family
  • Source of income for your family in the event of your demise
  • Retirement security for you and your spouse
  • Helps to pay debts
  • Children’s Education and marriage
  • For your short-term and long-term financial goals

How to pick the best life insurance policy?

There are a few basic things to consider before you buy a life insurance policy. Each individual’s needs are different and so the policy that is suitable for your friend need not be right for you. So, consider the factors given below to pick the right insurance policy.

1) Insurance cover

The key factor to consider before buying an insurance policy is the expected amount of insurance cover or the amount of money that is required. This amount should be able to secure your family’s financial needs and maintain the standard of living. You should take into account the number of dependents and the important financial needs of each member to arrive at the right number. Always remember to include inflation while calculating the long term requirements.

2) Age

The cost of most insurance policies is dependent on the age of the insured. The earlier you buy, the lesser you pay. So, the next point to consider while buying an insurance policy is your age. It is recommended that you buy the right policy as early as possible and when you have less number of dependents.

3) Retirement and financial goals

Life insurance policies are not just to protect your loved ones when you are no more. They can also be helpful to you during your retirement. Pick the right kind of policy will help you to build that needed retirement corpus along with the added advantage of securing your family’s financial needs when you are not around. This will help you to live a peaceful retirement life.

Life insurance policy can also help you achieve your short term and long term financial goals including your children’s education and marriage.

4) Individual requirements

To pick the right life insurance policy one has to choose the vital requirement for which the insurance policy is bought. If you are the breadwinner of a family with many financially dependent individuals, then buying the right life insurance is very important.

5) Smokers

If you are a smoker, then keep in mind that you will be paying higher premiums as compared to non-smokers.

6) Debts

If you have any current debts, then you should choose an insurance plan that provides a higher loan facility.

7) Risk appetite

If you are comfortable taking high risks to get good returns, then opt for unit-linked life insurance plans. These serve as high return investments apart from providing life insurance cover.

8) Riders

Riders are supplementary items, which the insurance company gives to the insured. They can get these items by paying extra premiums. Riders help in enhancing the insurance policy coverage. Some of the popular riders available are:

  • Accidental Death Benefit Rider
  • Accidental Total and Permanent Disability Benefit Rider
  • Waiver of premium
  • Surgical Care
  • Hospital Cash
  • Critical Illness Rider

Not all riders are provided by all insurance companies. You should check on what riders the company offers before you pick your insurance plan with that company.

Tips to Choose the Best Life Insurance Policy

Other than the points discussed above, there are other items that you have to look into while picking your life insurance.

  • Evaluate your long-term and short-term financial goals and needs.
  • If the sole purpose of the insurance plan is to only provide financial security to your loved ones, then it is better to choose a term insurance plan as it gives a higher sum assured at a lower cost.
  • Do sufficient research and compare various policies offered by different providers.
  • Read the details of the protection designs. Check the inclusions and exclusions of the policy.
  • There are some providers that give riders included as a part of the plan. Check if such plans fit your needs as it will save money.
  • It is better to go with annual premium payment as it is offered at good discounts.
  • Depending on the financial needs of your family, you can choose the final payout plan.

It is always a good idea to seek help from professional insurance agents who can come up with the best policy based on customer’s needs.