A young couple bought a life insurance policy from a reputed insurer. They were completely reliant on and guided by their broker throughout the process. Later on, long after they had signed the policy document and paid the first premium, they discovered how the policy offered insufficient coverage to meet their costs and even that came at a higher premium than several other counterparts. They also found several exclusions, no options for expanding coverage, and no flexibility in paying premiums.
You don’t want to face a similar situation right? You should then have a checklist of key benefits and features to tick off while choosing your life insurance policy.
Selecting a Life Insurance Policy- Things to Check
While buying a life insurance policy, here are some things that you must keep an eye out for:
- Make sure that you finalize the coverage that you require for safeguarding your loved ones. It should be ideally 15-20 times of what you earn every year or even higher. Calculate after factoring in inflation and add up children’s higher education, debt repayments, monthly household costs, etc. Subtract this sum from your current assets and then choose the final figure as your coverage amount. The insurer should be able to offer a coverage amount that is in sync with your specific requirements.
- Ensure that the premium payable for your chosen coverage is affordable and within your means. Compare premiums for the same coverage and tenure across multiple insurers before coming to a final decision.
- The insurance company should ideally give you flexibility in choosing the tenure of the plan. You should be able to choose tenures as per your own circumstances and objectives. For example, many choose to get coverage for the entirety of their working years.
- Another aspect to check is whether you can flexibly scale up your coverage amount in the future along with customizing your premium payment frequency, i.e. monthly, yearly, half-yearly, quarterly, etc.
- The insurance company should not have any hidden charges/costs that you find out later. Check the policy documents carefully for transparent disclosures of all expenses payable for the policy in question.
- The inclusions and exclusions aside, look for riders or add-ons that you can use to widen your coverage. These options and their additional premiums and benefits should be outlined clearly.
- Check the insurer’s claims process and claim settlement ratio (should be on the higher side) before proceeding.
- Also check whether the application process and documentation are simple, along with watching out for medical tests, if required.
- If there are any investment components, find out more about the premium allocation for the same, terms and conditions, lock-in periods, etc. Also make sure that there are provisions for partial withdrawals down the line and flexibly changing allocations to various investments as per market conditions and your risk appetite.
These are some of the key things that you should examine while selecting a life insurance policy. Take your time and do not rush into your decision by any means.
