Before buying a life cover, it is important to ask the life insurance agent several essential questions. To find the right life insurance policy, here are the top 10 questions every individual must ask the agent.
Availing a life insurance cover without asking your agent/advisor the right questions can be just like crossing a road without looking left or right. The purpose of life insurance is to financially secure your loved ones in the event you are no more. So, if you were to buy insurance without understanding its basic functions, you risk leaving your family members with an inadequate safety net at a time when they might need it the most.
To ensure such an instance does not arise, here are 10 important questions you need to ask your insurance agent before buying life insurance:
1. How is my insurance coverage determined?
Applicants are advised to keep in mind how much they will need to pay their debts off, and how much their dependents will require to maintain the same lifestyle if the life assured is no more. While all insurers factor in those two variables, insurance companies often use different formulas for assessing specific insurance needs. Thus, individuals must enquire about the analysis that the agents use to determine the level of cover.
2. What are the factors or elements on which the bonus depends?
Bonus is the extra amount that gets accumulated to an insurance policy on an annual basis, which gets paid to the policyholder on the plan’s maturity or in the case of the individual’s demise. The amount of bonus declared on the policy comes down to several factors. Ask the insurance agent what those factors are and the guaranteed amount that will be paid under the plan.
3. What are the exclusions under the policy?
A life insurance policy does not pay out the sum assured for all kinds of deaths. There are certain instances that are not covered by life insurance. It is therefore important for one to understand the policy exclusions in detail. Ask the insurance agent or advisor about all situations that could make the listed nominee ineligible to receive the death benefit amount.
4. What is the appeals process in case the sum assured is denied?
There are many reasons as to why an insurance claim could be rejected. If the nominee (for a death claim) is not satisfied with the reasons given for a claim rejection, then a complaint can be raised. Before availing an insurance policy, the applicant should fully understand the appeals process of the insurance company should any similar incident i.e. claim rejection, arise in the future.
5. How much of my money will be invested?
A life insurance product like ULIP puts part of the premium towards a life cover, while the remaining is invested into a fund, which can be equity, debt or both. Ask the advisor or agent exactly how much money will be invested in the fund immediately. Also, check out allocation and other charges on the company’s website or product brochure.
6. How are benefits paid out?
In the event of the demise of the life assured, the sum assured is generally paid in a lump sum to the nominee(s). However, some plans provide the option of paying out the death benefits in a monthly income format, or a combination of the two - part in lump sum and part in regular income. The applicant should ask the advisor the manner in which the policy benefits will be paid to the nominee.
7. What happens if I miss a premium payment?
There may arise moments when a policyholder can find it difficult to ensure timely premium payments. Keeping this in mind, it is important to look at the terms and conditions of the policy while purchasing insurance. They will give you an idea about what happens in case of a missed premium. Most insurance providers grant customers a grace period of 30 days, after which the policy can lapse. It is important to ask the agent about what happens to the benefits in case of non-payment or late payment of life insurance premiums.
8. What riders do I get with the policy?
Many life insurance providers offer riders, which are additional benefits that can be added to the base plan. There are a range of riders offered by insurers, with some of the popular ones being - Accidental Death and Permanent Disability Benefit Rider, Critical Illness and Rider Waiver of Premium Rider. Now, some riders are in-built, while others require extra premiums to be paid. Applicants should ask the insurance advisor or agent whether or not the riders are available with the base plan and which would be the best-suited add-ons (to be availed) depending on the life assured’s profile.
9. What lifestyle factors affect life insurance premiums?
Before issuing a life insurance policy, insurers take into account certain lifestyle factors. Some of the elements that will be taken into consideration by insurers include - whether the applicant is employed in a risky profession, has any unhealthy habits and participates in any dangerous hobbies. Enquire of the agent the lifestyle factors that have a bearing on the life insurance policy before and after the policy goes into effect.
10. How much money will I get on surrendering the policy?
Surrender value is the amount an insurance company will pay to the policyholder in the event the policy is voluntarily terminated before its maturity. The sum of money differs with every policy and with every provider. Applicants are advised to ask the insurance company about the amount payable to them as surrender value should they decide to discontinue the policy.
Asking the right set questions is the key to finding the best-suited life insurance policy for one’s insurance needs. To make an educated decision about the policy purchase, it is important for the applicant to be well-versed about the product. Look for an agent who will help find a comprehensive plan at an affordable rate, and is ready to educate the individual about all matters pertaining to the policy.