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Important Things to Know Before Buying Life Insurance

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Life Insurance

No financial planning can be completed without a Life Insurance Policy. So if you are also doing your financial planning, it would be advisable to know some important things about Life Insurance. These tips are on the basis of my experiences. I am telling you these things on the basis of your experience.

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Today there are more than enough Life Insurance companies in the market. There is no shortage of options. Just open the TV and you will definitely get Ads on any of the Insurance company. Some companies are selling Children Plans and some are promoting Pension Plan. In such situation, if you are confused about the Insurance Plans, then you have no fault in it.

Which plan is right for a man, it depends on many things. Like in which stage of life he is? What are its responsibilities? The needs of a twenty-five-year-old young man and a forty-year person will be different, and their purpose will be different. But there are few things that should be kept in mind while taking any life insurance policy. Today I will share few similar things you should keep in mind while taking any Insurance Policies.

Unit Linked Insurance Plans can be a good option:

If you want to invest your money (Minimum 5 Years), and also you want Tax Benefit on that money, Life Insurance Cover and also want a good return on that money, ULIP is a very good option. Especially since September 1, 2010, the IRDA has reduced the charges of such policies, and this has made it a very good option for the customers.

Just take care of one thing in taking these policies, buy them in the Monthly Mode, because these policies are related to share-market. And by paying premiums in the monthly mode, the chances of loss will be minimum. You can expect a return of 15-20% if the policy runs for long periods.

Now if you have to take policy in annual mode because of Tax Saving. Then you can also ask the life insurance company to invest your money in a monthly mode. Generally, in some policies this option is available. You can choose one of them.

Use websites to choose the right policy:

By visiting such websites, you can compare all the companies plans and choose the best option for yourself. You must do this job because any advisor will just tell you the characteristics of his product and try to tell it the best, but you will get all the information about all policies.

Combine Life Insurance with any purpose of your life

When you add a purpose to any policy, then it becomes more than a piece of paper. In this case, the chances of lapse of this policy are reduced. You have a reason to run it regularly.

It is important that you know your purpose and accordingly chooses your plan. Your objective may be to raise money for your retirement, it may be of higher studies of children. But if doing it for the Tax Saving purpose, then this is not an objective, it is just an added advantage.

Use the Internet to purchase policy:

Most people take life insurance through an agent or advisor but if you want you can also buy a policy through the Internet. You can take advantage of this facility by visiting any company website. Doing so will reduce your premium because now the company will not have to give any commission to the advisor. But if you are consulting with an advisor and buying a policy from him, keep in mind that do premium payment only through the cheque and never forget to take Receipt.

Give the insurance company the right information:

There is a principle of Life Insurance, “Principle of Utmost Good Faith“, according to which both the company and the customer have to give each other the right information. For example: If someone has diabetes and does not tell this thing in the application form and in some years he dies due to diabetes, then family members will not get the sum insured. It is therefore important that you give accurate information to life insurance company. It would be better if you sit relax and fill the form in front of yourself. And keep his photocopy with you.

Take advantage of Free Look Period:

You can return your policy within 15 days of receiving the policy document. So even if you have taken any policy by mistake, there is no problem even then you can cancel it and can take your money or you can convert it to another plan.

First, know that how much Life Insurance you must have

Here, the word “how much” mean, not from premium, but from sum insured or sum assured. This is the money that the family receives on the death of the person.

Thumb Rule says that a common man should have 10-12 times life insurance of his annual income. For example: If your annual income is 5 lakhs then you should have a life insurance of 50-60 lakh. The logic behind this is that if a person dies, then his family should get a lump sum of money so that if that money kept safe somewhere then his interest will be around the person’s annual earnings and there should not be any financial crisis on the family.

It is not a big deal to take so much insurance. If you want you can take a good company’s term plan. A 30-year-old friend of mine has just recently met Kotak Mahindra Life Insurance Co. From Rs.6700 per year, the insurance of Rs.5 lakh has been taken.

Get Rider Sure:

You can attach some additional coverage or riders with any policy. For example: Critical Illness (CI) rider, Accident Death Benefit (ADB) and you will be charged very lee for these plans. You can get ADR rider of one lakh only by paying a hundred bucks extra. The nominee will get double the amount of sum insured upon death in an accident. Generally, the advisor does not have to tell about them, so it is important that you keep them in mind.

Do not go on enticing promises:

If someone makes a promise that he will double your money in three years, then never take a policy from him. According to the IRDA rules, any life insurance company can not show you a return of more than 10%, if someone is confusing you then be cautious. It may be because of the company has given an unprecedented growth before, but it will always be that there is no guarantee.

Take life insurance at an early age:

As the age increases, the companies charge more premium for the same sum insured. It would be better if you take Life Insurance at an early age. It is obvious that in the beginning, the income of the person is very low, so take your policy according to your budget and increase your life insurance cover as you increase the income and take the new policy.

Friends, we have a similarity between life insurance and helmets in our country. Life insurance is taken for tax saving and helmets are taken to avoid the police fines. Even the real value of these two is known only when a tragic event happens. So if you do not have any of these two then do not wait to know their real value, just take it as soon as possible.

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