Life Insurance –Required Cover
What should you look for before deciding to buy a life insurance policy?
Assess your need for buying any life insurance policy – the standard thumb rule is that your life cover should be ten times your annual income. This is so that your family does not suffer financially in case something were to happen to you.
Read the policy brochure and policy wording documents thoroughly and understand the features yourself. Also understand the benefit illustration given by the agent / website but do not trust them blindly, take your time to ask all types of questions and do your own research -
- Understand the type of policy – traditional or market linked
- Availability of guarantee of return in case of traditional policies
- Understand the various fund options in case of market linked policies
- Any charges to be deducted from your premium amount
- Liquidity terms and conditions in the policy – lock-in-period, total term of the policy and any loan availability in case you need money before the policy ends
- Coverage of the policy – this is necessary to know what is covered and do you need to fill up any gaps in your coverage
- Exclusions under the policy – this is necessary to know to what is not covered and to avoid rude surprise (read claim rejections) by life insurance company later
- Details of premium to be paid – premium amount and total premium paying period
- Free-look period – all life insurance companies allow you to return the policy within 15 -30 days If you do not like the policy or you think that the product is not suitable for you
- Impact of premium non-payment
- Revival terms and conditions
- Claim settlement ratio – higher is this ratio, higher is the percentage of claims settled by a company. This ratio is publicly available on IRDAI website and also on the website of some insurance aggregators. Minimum acceptable ratio should be 90% .Any company having higher ratio is generally considered good
- Grievances redressal facility and customer experience reviews
So, you must have understood that the policy charging you the cheapest premium might not be the best one. You sure do not want to land up in a situation where your family faces claim rejection or bad customer service.
It is important to identify not only the right policy but also the right insurance company. So, to identify the right policy there are a few important aspects that need to be considered. Let us discuss this in the next section.