How to Choose the Best Life Insurance Policy?

bySurobhi BoseLast Updated: August 19, 2022
How to Choose the Best Life Insurance Policy
How to Choose the Best Life Insurance Policy

Having a life insurance policy is a must for every individual. It provides the right financial security to the individual and his/her family in case of any eventuality. A life insurance policy not only provides financial stability in case of any emergency but also provides a sense of security to the family in the absence of the breadwinner of the family. While every individual should have a life insurance policy, not many people know what to look for while purchasing the policy.

When it comes to providing financial coverage to the family, one would surely want to buy the best life insurance plan to ensure maximum protection for their loved ones. However, because there is an N number of policies available in the market, choosing the most appropriate plan as per the requirement and suitability can be a difficult task. There are many different aspects that one should consider while purchasing the right life insurance policy.

Further, in this article, we have mentioned some simple tips that an individual can consider while purchasing a life insurance policy.

Start as Early as You Can

Nowadays, people follow an ignorant lifestyle and are living in a world with fast-paced technologies. Moreover, with the growing age, the responsibilities also increase. Thus, it is quite important to purchase a life insurance policy as early as possible. Purchasing a life insurance policy while being young, not only provides the benefit of paying a lower premium for a higher sum assured but also gives the advantage to save for the long-term.

Assess Your Needs

Before searching for the best life insurance plan for the family, it is extremely important that an individual takes a step back and assess their needs first. It is important to determine the annual income and estimated expenses towards the family. The individual must consider factors like, is there any other source of income that the family can rely on to take care of their liabilities and meet the day-to-day expenses, in case of his/her unfortunate demise. How many dependents do a person have? By analyzing these factors one can estimate how much coverage they should choose and will be in a better position to buy the right plan.

Seek for Long-Term Investment

Always try to go for a long-term investment as it will provide more benefits as compared to the short-term life insurance plan. By purchasing a life insurance policy for a longer policy tenure an individual can choose a higher sum assured amount in exchange for a minimum premium. Moreover, if the policy buyer chooses a savings cum insurance plan or other products of life insurance policy then they will have a longer tenure to create a financial cushion for their loved ones and will help them get more advantages of life insurance plan.

Know About the Claim Settlement Ratio of the Company

If a person is planning to purchase a life insurance policy, then checking the claim settlement ratio of the company is a must before purchasing the plan. It is very important to do a background check on the claim settlement history of the insurance company. Always try to go for companies that have a higher claim settlement ratio. The higher the CSR of the insurance company, the more reliable it is. The claim settlement ratio of an insurance company is defined as the percentage of insurance claims settled by the insurance company divided by the total number of claims received in a year. The company with a good claim settlement ratio provides the guarantee that in case of any eventuality, the insurance company will process the claim and the benefits will be given to the beneficiary of the policy.

Compare Policies

This is another important step to take while buying a life insurance plan. There are many different variants of life insurance policies available in the market. As every buyer has his own requirements and choices, the policy which may benefit the other person might not be beneficial to you. Thus, it is significant to compare the quotes of different plans online as per one’s own specifications, so that an individual can choose the most beneficial plan for themselves, which offers all the benefits and covers as per the requirements.

Analyze the Inclusions and Exclusion of your Insurance Cover

While purchasing a life insurance plan, it is advised that the insurance buyer takes the assistance of an insurance agent to understand the fine lines of the life insurance policy documents like its exclusion and inclusion. It is important to know what are the things that the policy does not cover. By knowing these things, an individual will be able to make an informed decision and prevent their family from unwanted hassle at the time of filing a claim.

Buy an Affordable Cover

After thoroughly comparing different policies, the policy buyer must calculate how much premium they can pay towards the policy. If a person wants to purchase a larger coverage, then it makes sense to purchase a term insurance plan. Term insurance plans offer higher coverage at a lower premium rate as compared to any other life insurance product. One can choose to purchase a savings cum protection plan eventually as his/her financial condition improves and they can afford to pay a higher premium.

Wrapping it Up!

By considering all these factors, an individual can opt for the right life insurance policy for the family and secure the financial future of their loved ones even in their absence.

How much life cover should I have?
As per the basic rule of thumb, an individual should buy a life cover at least 10-15 times their annual income. For example- if the annual salary of an individual is Rs 7 lakh then he/she should purchase a life cover of up to Rs. 70 lakh.
Is there any maturity benefit offered under a life insurance policy?
Yes, if the life assured survives the entire tenure of the policy then a lump sum amount is paid to the policyholder as maturity benefit by the insurance company and the tenure of the policy comes to an end.
What is the right age to buy a life insurance policy?
It is always advised to purchase a life insurance policy while being young, as one can choose higher coverage for a longer tenure and at a very lower premium rate. With the increase in age, the premium rate of the policy also increases.
What is the Claim Settlement Ratio (CSR) of the company?
The claim settlement ratio of an insurance company is defined as the percentage of insurance claims settled by the insurance company divided by the total number of claims received in a year.

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