How to Compare Life Insurance Plans?
Published On Apr 12, 2021, Updated On Apr 23, 2021
Table of Contents
- Types of Life Insurance Policies in India
- Things To Check While Comparing Life Insurance Plans
- Tips To Compare Life Insurance Plans
- Final Words
Life insurance has become a necessity in modern days and has become an integral component for the smooth functioning of our lives. One of the biggest challenges that pertain to life insurance policies is choosing the right type of insurance, given that insurance companies and new policies are mushrooming at a great rate.
Types of Life Insurance Policies in India
Before ascertaining the parameters to compare policies, it is paramount to learn the type of life insurance policies in India:
1. Term Life Insurance Plans
Offers only death benefits and the simplest of all insurance policies.
2. Endowment Policies
Offer both death benefit and investment benefits
3. Unit Linked Insurance Policies
these are both investment and insurance policies that are unit-linked.
4. Money-Back Policies
These are savings and protection policies.
5. Whole life policy
These are also protection and savings policies with retirement benefits for the insured.
6. Pension Plans
The annuity of these plans kick in post-retirement.
Things To Check While Comparing Life Insurance Plans
Comparing life insurance policies carry tremendous benefits. It helps to save money and time and helps drive maximum benefit. Life insurance policies can be compared based on the following parameters, to derive at the best and a fruitful option.
1. Rate of Return
It is important to calculate the internal rate of return of the policy to measure its net worth. This is calculated based on the premiums of the policy against the death benefit it offers. To evaluate a policy, request the IRR report of the policy.
2. Extent of Death Benefits
Individuals can adopt policies that render the maximum death benefit based on the current financial situation and future financial requirements of the family. Make sure that the death benefit promised in a policy is at least four to five times one’s annual salary. Other factors such as debt load and financial health should also be taken into account as higher death benefit translates as higher premiums.
3. Tenure of Plan
Access the tenure of coverage offered by each plan and choose the one that offers the maximum coverage and high returns with low premiums. It is better to choose a plan that has a tenure of at least 30 years to prevent costly renewals.
Tips To Compare Life Insurance Plans
Following are are some common tips to compare life insurance plans:
1. Make use of Online Insurance Calculator
The online insurance premium calculator is an effective tool to calculate the premiums and the outcome of different policies from different insurance companies. The results are instant and accurate.
2. Check Insurance Companies Track Record
Compare the insurance policies offered by different providers based on their financial rating and stability. It is beneficial to dig a little into the actual financial trend of the insurer and access their history before signing with them.
Check all important factors such as premium amount, benefits of the policy, and financial status of the company before choosing a plan and make sure that the plan that is chosen has the best benefits.