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LIFE INSURANCE

How to Choose a Life Insurance Policy to Meet Your Needs?

Rashmi Ghosh Rashmi Ghosh 04 April 2019

Life Insurance on your mind? Don’t let the wide array of options from across insurers confuse you. It might look like a challenging task, but we’re here to help! Read on to know the factors you need to consider to take a conscious decision.

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Oh my gosh, how do I choose the best life insurance policy from so many policies offered by so many insurance companies! This is often the reaction while buying a life insurance policy. But, hold on! Choosing a life insurance policy that meets your insurance objectives needn’t be such a daunting task. Not if you ask yourself the right questions and approach the process in an organized way.

So, let’s get started with the list of 6 things to keep in mind to find the right life insurance plan for yourself.

1. How much coverage is enough coverage for you?

Your coverage will depend on the number of family members you plan to get covered under one life insurance policy. Not just the number of financial dependents, but the extent of their financial dependence on you will also play an important role in determining the coverage. After all, the primary objective of a life insurance policy is to assure the family of financial security in the unfortunate event of your absence. Would you like your insurance policy to offer a regular source of income as well, when you are not around? If yes, you have to keep that in mind too while deciding on your coverage.

For instance, if you want to cover your child under the life insurance policy, you need to make arrangements for their future like education, marriage, etc. If you are planning to cover your elderly parents, you have to consider financially securing their medical treatments that are typical to old age. For deceased policyholders who were the sole breadwinner of the family, a sum assured that supports their usual lifestyle also has to be arranged for.

2. What’s your age?

The type of life insurance policy that will be the right fit for you will be determined by your current age, among other factors. This is because, for certain life insurance policies, your premium eligibility depends on your age. Apparently, the lesser your age, the lower will be the premium amount you can avail.

3. What is your current annual income and lifestyle?

Your present annual income is one of the primary factors that serve as a deciding factor while choosing your life insurance policy and premium. This definitely does not mean that your annual income will remain constant throughout your professional life, but it would surely determine your current premium paying capacity. You can review and increase your premium each time your annual income increases. It is recommended that the ideal life insurance policy should be between 15 and 20 times of your annual income.

The premium for non-smokers will be lower than that for smokers. Since smokers have a higher chance of falling prey to illnesses, insurers charge them a comparatively higher premium than from non-smokers. The healthier you are, the lower will be your premium payment eligibility.

4. How do you want your post-retirement payout?

Would you want your retirement payout as a lump sum or in the form of instalments at regular intervals? You need to select your life insurance policy according to your need and payout preference.

5. Which life insurance policy should you opt for as per your unique needs?

The type of life insurance policy you choose depends on what your requirement is. It is largely governed by the stage or phase of life you’re in. Based on the number of dependents you have, you can decide what your life goals are and choose an investment plan to help you achieve them. If your family members are financially dependent on you, it’s always good to secure their future with a term plan. Compare plans from different insurers and make a need-based purchase. For long term investments that are accompanied with low risk and healthy returns, Unit Linked Investment Plan or Traditional Endowment plans are considered to be wise options.

6. Do you have any loans and other impending debts?

One can make use of a Life Insurance policy to balance out their financial condition. If you have existing debts that you’re afraid will be a burden for your family in case of your sudden absence, it is recommended that you opt for a Traditional Endowment Plans or Whole Life Plans. These plans offer policyholders the opportunity to borrow a loan against their life insurance policy, saving from the risk of mortgaging your home and other valuables.

Importance of Riders in Life Insurance

Riders are additional benefits available over and above basic life insurance policies. These are optional features that policyholders can purchase on an additional payment over the premium for the basic plan. Riders in life insurance improve its effectiveness of a life insurance policy. Policyholders should purchase a rider only if it suits his/her unique needs.

Some of the common add-on riders available with life insurance policies are:

  • Accidental Death Benefit Rider
  • Accidental Total and Permanent Disability Benefit Rider
  • Critical Illness Rider
  • Waiver of Premium (WoP)
  • Hospital Cash Rider
  • Accelerated Death Benefit Rider

To wind up

Research thoroughly on the features and benefits offered on every life insurance policy. Analyse their significance, weigh them against your financial goals and opt for the one that suits your unique requirements. Yes, it’s that simple!

Rashmi Ghosh
Written by Rashmi Ghosh
Digital enthusiast, dreamer with a colourful mind and shares her soul with canines. She survives on coffee, and food and travel feature among her topmost priorities.