Life insurance comes with many benefits. Nowadays, life insurance is not just a contract between the insurer and the insured, which provides protection against the risk of life by paying premiums. For stability in the market, every company and product needs to adapt to the prevailing demand and conditions and the same happens with life insurance products. In these years of market changes, regulators and life insurance companies have taken major steps to meet the changing demands, thereby providing the following options and benefits to the customers:-
- Wide range of product portfolio
- Savings and investment options
- Additional Benefits With Life Insurance
- Different ways to get low premium and high coverage
- Additions to the list of salient features of life insurance policies
- Transparency and hassle-free process
With a pool of different companies, products, and benefits to choose from, you have to choose the best one for you. There are many things you should keep in mind before buying insurance and there is no specific guideline to choose the best one, it all depends on your requirement and situation. But there are some important points associated with each policy that can help you filter the best insurance policies. Based on those important points, we have outlined the following important tips for buying a life insurance policy.
Start Early
Buying life insurance when you are young gives you a lot of benefits. You will be able to get higher coverage at a much lower rate of premium as age has a direct effect on the premium rate (the younger the buyer, the lower the premium). Also, with lower premiums, you will get a better financial plan, longer duration of coverage and your premium will be locked at a much lower rate for your entire policy term.
Choose the Right Coverage Amount
Don’t decide your policy coverage based on your emotions or single factors (like 10 times your salary). While deciding the coverage amount, always consider your current lifestyle, debts, assets, future liabilities (children’s college education, moving your family to different places, etc.), and inflation rate. Choosing low coverage will give you zero benefits while choosing high coverage will be a costly deal for you.
Comparison is the Key
It is very important to compare before buying an insurance policy. It helps you choose the best policy at the best rate. There will be many policies that will not offer the benefits you are looking for and may be available at different rates. There are many IRDAI certified comparison portals that provide comparisons of different policies on their websites which is fair and easy.
Choose the Right Policy
Different policies have different benefits, eligibility criteria, terms and conditions, exclusions, and inclusions. You can choose the right policy for you only if you are well-versed in it. So the key to choosing the right product is to have a better understanding of it. Know about the available riders, add benefits, what is not covered under your policy, premium rates, and all other aspects related to your policy. Know your needs thoroughly and then find policies accordingly.
Choose the Right Company
There are more than 20 companies in India and choosing a trustworthy company is a must. There are some companies that provide the best insurance policies and are also reliable. You need to check the claim settlement ratio, reviews (by clients and experts), claim settlement process, product portfolio, prices, etc. of different companies to choose the right one.
Understand the Brochure
A brochure is available with each life insurance product which is available on the company’s website. It covers all the major benefits, features, eligibility, inclusions, exclusions, terms, and conditions related to the policy. Read each fine line of the brochure to get a better understanding of your policy. This will help you utilize the available benefits and avoid any nasty surprises in the future.
Disclose your Information Accurately in the Proposal Form
Some people hide facts about themselves while filling out proposal forms and giving personal details to the company. For example, some people mark themselves as non-smoker while giving details to get a lower rate of premium. But later, at the claims stage, it may result in zero profit as the claim will be rejected due to misleading information provided by the insured. You can’t fool the company by giving wrong information. Therefore, it is always necessary to give accurate information about yourself to the company to avoid any kind of hassle during the policy or while making a claim.
Best Life Insurance Policy
One of the most important things to consider when you are looking for the best life insurance policy for you is the type of insurance you are buying. While the differences between these policies are not always explained very well, they offer different coverages, different premiums, and different exclusions and therefore should affect what you buy.
Life insurance falls into 4 main categories, although it can often seem like there are more because different companies will title them differently. Getting familiar with each type will help you know what type of policy you are looking for and which would be the best life insurance policy for you.
Term Life
Term insurance will pay a fixed, specified amount to your beneficiaries in case of your death in lieu of regular premiums. These policies usually have a specified period of coverage, or periods, after which they are no longer valid. Most of these policies pay only in case of death and not if you have contracted a critical illness or are in an accident that seriously prevents you from returning to active work.
If you are looking for minimum individual investment or premium then term life can be the best insurance policy for you. On the other hand, if you do not die during the specified period of coverage, you do not receive anything irrespective of your investments.
Whole Life
Whole life coverage does not have a fixed term and hence is considered permanent insurance. In addition, this type of insurance policy has a cash value on top of the specified death benefit, and you can access that cash value at any time. However, whenever you use up money from the cash value of your policy, it is considered a loan and your beneficiaries may not receive the entire death benefit if you die before paying it back.
While whole insurance policies usually have significantly higher premiums than term life policies, the greater flexibility and durability of insurance can outweigh this downside. If you can afford a little more on premiums, then a whole life policy may be the best life insurance for you.
Universal Life
Universal life offers some of the same benefits but more flexibility than whole life insurance. Most universal policies offer flexible premiums, and you make up the difference between what you’re paying for the death benefit and the policy’s cash value (which many lifetime policies don’t offer).
If you want whole life benefits but know you can’t pay premiums at the moment, a universal policy can allow you to have a permanent insurance policy with some cash value and lower premiums.
Endowment Life Insurance
Endowment insurance policies build up cash value until the total policy amount equals the death benefit. At this point, the policy reaches its endowment age and pays whether you die after a specific time or when you reach a certain age.
If you cannot afford the higher premiums, then this is not the best life insurance policy for you. However, if you want some guaranteed income, provided you are alive beyond a certain age, then check out this type of life insurance.
No matter what type of life insurance you choose, you should know what you are getting. This way, you can be sure that the choice you make is for the best life insurance policy you can get.
What is Life Insurance Policy Rates
Getting the best deal while buying a life insurance policy is not an impossible proposition, though it is a bit cumbersome. It is always advisable to shop for the best possible policy that meets the needs and requirements of the individual. Given the complex insurance jargon, hidden fees, and other intricacies, it is always recommended to enlist the services of a good financial expert or advisor. Buying a life insurance policy is an important decision in most cases and thus has to be done with due care. It always helps to compare policy quotes, shop around and collect information online or offline from independent agents, brokers or companies.
One of the best-kept secrets of the insurance markets is that commission-free insurance agencies and companies actually exist. Insurance policies from these companies are often cost-effective. However, one should be prudent in examining the financial position of the company, its reputation, and its history of paying promised dividends before buying a policy. This background checking should be done for all companies big or small.
A wisely purchased life insurance policy can be a source of dividends, investments, and liquid cash when needed. Many companies have provisions for their employees to get low-cost group term life insurance for their planned time. In most cases, term life insurance is much more affordable than whole life insurance. The initial premium is also much lower than that of whole life insurance.
However, in later years, as the risk of death of the insured increases, the premiums become significantly higher, sometimes much higher than those of whole life insurance. The return of premium policy is an amalgamation of term life and whole life insurance. Although they are popular for the extra cash surrender value, they are almost twice the price of a standard term insurance policy. Level term insurance’s initial premiums are higher than the annual renewable term, but they are a value if brought for a period of 10 years or more. The premiums are reduced in subsequent years. In yearly renewable term policies, the premium rate is increasing over time.
A whole life insurance policy offers a lifetime protection guarantee and features cash value and dividend generation and investment, unlike term life insurance, which is purely protection-oriented. However, whole life insurance policies are much more expensive than life insurance. The initial premium is also much higher than the actual value of the insurance. This enables the addition of cash value attributes and leveling of subsequent premiums. Universal life insurance allows the flexibility to choose the premium payment and death benefit as well as the cash value.
The rates of life insurance policies also differ from individual to individual as well as from company to company. It is always appropriate to compare quotes. It is comparatively simple to compare the quotes of term life insurance, where different features of the policy like term or duration are the same. Premiums can be compared to find the best deals. Each company has different financial advisors, parameters for mortality estimation, commission rates, dividend estimates, etc.
