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5 Things to Think Before Buying Life Insurance

Published On Apr 28, 2021

Purchasing life insurance is one of the most important financial decisions that one makes. There is a general notion that the life insurance policy should render ten times the annual salary of the insured as a death benefit. Policy seekers should choose a plan on a reasonable tenure to reap quantifiable benefits.

The Five Most Important Things to Consider Before Buying Life Insurance

Before buying the insurance policy, one has to understand the purpose of buying it. It should protect the family members after the death of the insured and should help them live a debt-free life. Thus, consider the following things carefully before opting for life insurance.

1. Calculate the Amount of Insurance Required

It is important to calculate the amount of benefit required and choose a plan accordingly. Plans with a higher sum insured will incur higher premium costs but are worth the investment as it pays back to keep the family happy.

Choose the insurance scheme, based on the debts and loans, age and number of dependents, proposed investments in the future such as buying a house, vehicle, etc. Make sure that the insurance pays for all these debts in case of any eventualities.

2. Compare Policies Before Buying

There are broadly two types of insurance policies, namely term insurance, and savings with protection plans. Term insurance has a lower premium and offers huge insurance cover. But the insurance company will not make any payments if the insured survives the policy period.

These plans are to protect the dependents and there is no personal benefit. The latter are savings and protection schemes, where the insured gains a maturity benefit that is equal to the sum assured along with other bonuses upon completion of the policy tenure.

You May Also Like To Read:- Benefits of Buying Life Insurance Policy

3. Choose Plan That Are Affordable

Anyone can opt for a policy cover with a huge sum assured, but the rate of its premiums will also increase accordingly. It is important to assess how much the plan will cost in terms of premiums and the ability of the person to afford the premium amount. Term insurance plans are cheaper but have limited benefits. 

4.  Check the Claims Settlement Ratio of the Insurance Company

Life insurance is an agreement between the insured and the insurance company. The insured will pay a premium at fixed tenures with the insurance company and the insurer promises to pay the sum assured to the nominees of the insured upon his death.

The credibility of the company to repay the assured sum is their claims settlements ratio and its details are available online. Check for these details before choosing the insurance company, as it is a mark of their credibility. Also assess the solvency ratio of the company, which is the measure of its financial stability. 

5. Choose Definite Add-Ons with the Policy

Add-Ons or riders are additional wings that can be added to the policy to maximize its efficiency. Some of these riders such as accidental death benefit, a disability rider, waiver on the premium rider, etc., can be of great help and can be bought at nominal premiums.

Also Read:- Don’t Fall For These Life Insurance Myths

Bottom Line

Life Insurance is a potential tool that offers tremendous benefits in terms of protection, tax benefit, and savings. One has to leverage the best plan that justifies their needs and requirements. 

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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