How to choose the best life insurance policy

Life insurance policies not only offer financial protection in case of death, but they also serve as an efficient tax-saving tool. But with the market flooded with a slew of policies, picking one according to your best interest can be tricky. So, here are some tips and tricks.

 

The coronavirus pandemic truly shook us in terms of how a health crisis could affect us and our loved ones. It made all of us realise how significant life insurance can be during such unprecedented times, especially if you have dependents. 


A life insurance plan ensures financial stability for both you and your family. Well,  this doesn’t mean you just pick any plan. Conducting some basic research and looking for a plan that can align with your monetary goals is imperative.


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How much assured sum are you looking for?


The sum assured is the total amount of insurance cover or the minimum amount that dependents will have after an individual’s demise. So, it is important to calculate daily expenses, the amount of debt owed and also take into account major events like weddings and children’s education for which you will need funds.


This will help you figure out the assured sum value. All you need to do now is add up monthly expenses, including collective premiums paid by the family as well as education fees and then multiply it by 12. This will enable you to arrive at the yearly expense of your family, which must be taken care of, in the event of a demise.


Your tenure


While the sum assured is likely to cover the family’s expenses, it may not include the rate of inflation which increases almost every year in the insurance cover.


So, it is also crucial to arrive at the right duration of the policy. If it is too short, then the insurance may lapse before the financial responsibilities are met. And, if it is too long, then the premium paid might be way more than the return.


Pick a trusted insurance firm


It is important to pick an insurance firm that has shown good will in the past and has an impressive track record. In order to ensure this, you can check their claim settlement ratio which indicates the number of policies the corporation has cleared in case of deaths. Ideally, this should be around 98 or 99 for every 100 claims. This step is pivotal to setting the seal with a corporation that has no history of uncleared or denied claims. 


SBI LifeeShield, HDFC Life Click2PortectPlus, Aviva i-Life, Future Generali Care Plus, Birla Sun Life BSLI Protect@Ease Plan and LIC’s Jeevan Pragati Plan are some of the highest ranked life insurance policies of 2021, according to BankBazaar. 


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Riders


Riders are basically just add-ons that you can include in the coverage of the insurance policy. For instance if a person is handicapped and unable to meet the premium amount, an add-on in the policy will help cover for it or defend the eventualities. 


Disability Rider: This ensures that an accidental disability rider gets a monthly income equal to a proportion of the sum covered for a period of time.


Critical Illness Rider: If the policyholder is diagnosed with a critical illness specified by the corporation, then they will receive a lump sum payment similar to the death benefit. 


Now that you have an idea about the intricacies of a life insurance policy, you must be wondering how to go about buying one. 


Security, savings and tax relief


Almost all Indian parents persuade their children to get a life insurance policy. Well, this is to inculcate the habit of saving. Life is full of ups and downs, and nobody knows what the future will hold. 


A life insurance policy offers financial security against the risk of death as well as deductions on your income tax and wealth tax for your monthly insurance premium. An insurance policy can also be offered as a security to avail a better loan value.


How to buy a life insurance policy?


Life insurance policies can be bought either offline or online. For an offline purchase, you can visit the nearest branch office of the insurance firm or contact their local agents. Here, you will be assisted by brokers to pick the best plan according to your needs and future goals.


In case you want to do it online, you can visit the insurance firm’s website and book one. Life insurance policies can be tricky and loaded with jargon, so it is wise to consult a trusted agent offline who can guide you to the right one. 


You can find comprehensive life, motor, health and travel insurance policies from trusted brands on platforms such as PhonePe, Policy Bazaar and PolicyX.com. Here you can compare policies offered by different institutions and pick one that suits your needs and financial goals the best. 


 

Edited by Roshni Shroff

 

Some resources to enable you get a better idea about how life insurance works: 


Types of Life Insurance Policies in India


Features and Benefits Of Life Insurance in India