Why is life insurance important?
“In a world filled with uncertainties, it is important to ensure the safety of loved ones. You can do this by having the protection of life insurance. – This is how an unknown author summarises life insurance’s importance in these few words.
A life insurance policy is a contract between you, the life insurance provider. The insurer will pay regular premiums in exchange for a lump sum.
Life insurance is not only a financial safety net, but it also provides other benefits. You can use it to save money, give you financial freedom, and reduce your tax* liability. There are many reasons to invest in life insurance. It can be difficult to find the right plan for you.
How do you find the best life insurance policy?
This guide will help you choose the best policy for your needs.
Evaluate your life insurance goals
Different goals may be different for each person. With the help of a life insurance policy, you can plan for your life insurance goals. A term insurance policy can provide high coverage and affordable rates if you are concerned about your family’s financial security.
You can invest in unit-linked insurance plans if you want to save money for your child’s college education or if you have dreams of owning a house. A retirement plan that will provide regular income can be purchased to cover your daily expenses after you retire.
Calculate the best insurance coverage you require
Financial advisers recommend that your life insurance coverage should not exceed ten to fifteen percent of your annual income. There are many factors to consider when estimating the right amount of life insurance. If you have debts, it might prove difficult for your family to pay the Equated Monthly Instalments. You will also need to provide funds for your children’s education and marriage. Inflation can cause your family to have difficulty maintaining their lifestyle if the primary breadwinner is not available. You will need to calculate the sum of the following:
- Add the annual family expenses to the number of years that income replacement may be required.
- The sum of all outstanding debts and costs of repaying mortgages if any
- You need to save money for future expenses such as your child’s education or wedding.
- To get adequate life insurance coverage, you can subtract the amount of liquid assets such as cash in hand, bank or other investments from the above-mentioned expenses.
- Find the policy that offers the best deal by determining the premium you will have to pay.
Online premium calculators can be used to determine how much you will need to pay to get the life insurance policy. Compare the coverage offered by different plans to determine which policy offers you the best value and the most affordable rates. Your earnings for the next year should be used to determine your premium payment term.
Choose the right policy term
The policy term should be equal to the length of time your family will be financially dependent upon you. For determining the ideal policy term, subtract your age from the age at the end of which you expect your income will stop or to achieve a specific life goal.
Choose a reputable provider of life insurance
A life insurance company with a Claim Settlement Ratio of (CSR), greater than 95% in consecutive years is generally considered reliable. CSR refers to the ratio of the number of claims the company has settled over a given financial year and the amount of claims it has received. To view the CSR for different Indian insurance providers, you can visit the Insurance Regulatory and Development Authority’s (IRDAI). You should also read customer reviews to find out if your insurer has a fast and easy claim process.
Don’t hide facts from your life insurer
Your life insurance should be informed if you smoke, drink alcohol, or work in hazardous industries. Also, you must declare any family history or current illnesses. These factors can impact your risk profile. It is important to provide accurate information in order to avoid rejection of claims in the future.
Carefully read the policy document.
Before you sign the final agreement, make sure to fully understand all terms and conditions. Learn about the lock-in period, and the circumstances under which the claim is invalid.
Life insurance can be purchased at an early age
Your life insurance premiums will be lower if you’re younger. You can save money on your premiums if you purchase your life insurance policy before you earn your first paycheck. As your income grows, you can start with less coverage and then add riders.
Select a comprehensive plan
Medical contingencies might affect your income adversely. It is important to have a comprehensive plan with the appropriate riders.
- If you have a serious condition such as kidney disease, cancer, or heart disease, the Critical Illness Rider will pay your full claim amount. This money can help you pay for treatment and protect you from income loss.
- The Accidental Death Benefit Rider provides additional funds to your family in the event of your sudden death. This protects your family from losing their regular income and helps them maintain their lifestyle.
- Permanent Disability Rider acts as a waiver of future premiums in the event that you become permanently disabled from an accident. Life coverage continues for the remainder of your policy term
- The Terminal Illness Rider gives you full access to funds to treat terminal illnesses like cancer.
It is a good idea to look for insurance providers that offer these benefits without any hidden fees.
Evaluate your life insurance needs regularly
You should review your life insurance needs every so often as your financial goals may change due to changes in your age or life events, such as marriage or birth. Your life insurance coverage can be reviewed periodically to adjust accordingly. Inflation can also be addressed by this process.