An agreement between an insurance company and a policyholder wherein the insurer agrees to pay a pre-determined amount as benefits either on the unfortunate demise of the life insured or after a certain period of time in exchange for premiums paid by the policyholder. It’s unfortunate that Indian buyers despite having an understanding of the need for life insurance, always find difficulties in picking appropriate insurance policies for them. This is one of those areas of personal finance that people do not understand.
Basically, a life insurance policy is purchased keeping the insurance needs and the investment potential of the policyholder in mind. You, as an insurance buyer, need to be extra cautious while buying a life insurance policy because through this you want to provide financial protection to your loved ones even after you’re not around.
Through this blog, I am making an effort to figure out the ways that would enable you to purchase the best insurance policy.
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Here’s a short list of DOs and DON’Ts you need to follow while buying a life insurance policy.
Do’s:
- You first need to analyze your insurance needs thoroughly, don’t imitate your neighbors blindly, you seek the help of your financial adviser in order to calculate a reasonable sum assured.
- Make sure the agent, insurance company, and broker you are dealing with has been granted a license by the IRDAI.
- Do extensive research over the internet in order to compare different products and their offerings.
- Review your policies, and their sum assured on regular basis, and amend them, if your insurance needs and circumstances change.
- Bring all your debts, liabilities, and outstanding loans into consideration while analyzing the sum assured.
- As a smart buyer, you should read the fine print carefully and also check for hidden costs.
- Make payment by cheque as it would be proof of your payment.
- Always make payments in favor of the insurance company.
- Buy policy online as it usually costs less.
- Treat a life insurance policy as a tool to provide financial protection, not for tax saving.
- Fill up the proposal form personally, don’t leave it for the agent.
- Before you sign the proposal form, discuss each and every point in order to make sure the information you furnished is correct. By doing this you will keep yourself away from any dispute at the time of claim.
- Keep a copy of the completely filled and signed proposal form.
Don’ts:
- Don’t let the agent or anyone else fill out the proposal form.
- Stop signing a blank proposal form or leave any column blank.
- Do not buy a policy with lesser coverage just to make it cheaper. If the premium is unaffordable, buy it with a shorter term instead.
- While filling up the proposal form, don’t hide any facts such as your medical conditions.
- Don’t let your policy get lapse as the policy does not provide cover during the grace/lapse period.
In the case of Unit Linked Insurance Policies (ULIPs) ask for
Various charges, Switching of funds, Fund options, and Benefits, if Policy is discontinued, Policy is surrendered or Partial fund is withdrawn.
Check out this Article: Know Why Term Plan is a “Must Have” Insurance Plan