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Things to Know While Buying a Life Insurance Plan

Updated On Jun 25, 2021

Doing a detailed study of various life insurance policies offered by different insurance providers can be tediously exhausting. But because of the financial significance of a life insurance policy in an unfortunate event, it is vital to choose the right plan which meets your requirements and comply with your future goals and aspirations. So, read the article to easily understand the importance of some factors that must be considered before buying a life insurance policy.

Things to Know While Buying a Life Insurance Plan

Here is the list of things that you should know about while buying a life insurance policy.

1. Your Coverage Needs

The right sum assured can be estimated through certain factors like family lifestyle and needs, liabilities, loans, mortgages, current income, inflation rate and future financial goals. The amount should be at least 15-20 times the life assured's current annual income to meet your personal needs and future requirements. 

2. Policy Duration

The evaluation of the tenure of the life insurance policy is equally important as the coverage estimation. The estimated duration can be based on your future career goals, such as your plan to retire early or at a later phase of life, to get the retirement benefits accordingly. Moreover, you can calculate the time when your nominee and dependents will no longer require financial support to determine the policy duration.

3. Difference Between Various Policies

Insurers provide multiple kinds of life insurance policies such as whole life, term life, ULIPs and money-back plans; it is essential to select the one that fulfils your financial needs and future aspirations.

  • Whole Life Insurance Policy - The whole life insurance policy is costlier than other plans as it provides cash value and death benefits. The beneficiary is provided with a lump sum after a specific duration or in the event of the policyholder’s death, whichever happens first.
  • Term Life Insurance Policy - Under this, the death benefits are paid to the beneficiary if the life assured dies before the completion of the policy duration. Moreover, this plan does not provide a maturity benefit like whole life insurance plans.
  • Unit-Linked Insurance Policy (ULIP) - Under this, the policyholder gets an additional advantage to invest in capital markets along with the life insurance.
  • Money-Back Plans -  Under this, periodic benefits are paid instead of paying maturity benefits at the term-end. 

4. Rider Benefits

The additional rider options provided with different policies help build a robust financial safety net for your loved ones in the face of an unforeseen event. Here are some riders you can consider while buying a life insurance policy.

  • Critical Illness Benefit - Under this, a lump sum is provided to the life assured if he/she is diagnosed with a critical illness covered in the policy plan.  
  • Accidental Disability Benefit - Under this, a certain amount of sum assured is paid monthly for a specific duration to the life assured if he/she becomes permanently or partially disabled due to an accident.
  • Waiver of Premium - Under this, the future premium payment obligations of the life assured are waived off if he/she becomes seriously ill or disabled. 
  • Accidental Death Benefit - Under this, an additional sum assured is paid to the beneficiary if the life assured dies in an accident. 

5. Policy Exclusions

Certain events like death during a war, a terrorist attack, suicide or childbirth are not covered under various insurance policies. Unfortunately, people often ignore reading about the policy exclusions while buying a life insurance policy. Hence, it is advisable to always check the guidelines carefully before purchasing a policy. 

Conclusion

It would be best not to buy a life insurance policy in haste, before considering the factors mentioned above. You can even consult a financial advisor or an insurance agent to help you guide through the process and choose the right insurance policy to ensure your family’s future and financial security.

Also read - How to Choose a Life Insurance Policy to Meet Your Needs?

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Find the right life insurance for you
Find the right life insurance for you