Original article is published in The Times of India
With demand for life insurance rising in a post-pandemic world, it is important to understand key factors that one should consider before purchasing a life insurance cover. While a variety of products and insurance providers exist in the Indian market today, the entire process can be confusing for first-time buyers and make them easy targets for insurance fraud.
Understanding one’s life insurance needs starts from assessing your family’s current lifestyle and calculating how much cover would suffice in the unfortunate circumstances of your demise. Most people purchase a plan with shorter durations, or an inadequate sum assured, in a bid to lower the premium expended on a regular basis. One must be clear as to why one is buying a policy and therefore the cover & period of cover should be thought through
Selecting the right life insurance product involves a deeper understanding of the available options and which one would be most suited to your specific requirements. Generally, term insurance, Traditional Plans & Unit linked insurance plans (ULIPs) are the most widely purchased products, although they are quite distinct from each other. Term insurance is for pure protection and offer the most affordable premiums, especially if opted for early on in life. Moreover, one can opt for additional riders like critical illness coverage, accidental death benefit or even a plan with return of premium to enjoy survival benefit on policy maturity.
Traditional Plans can be either guaranteed plans without bonus or ones where bonus is declared every year. ULIPs on the other hand are a combination of insurance and investment in the sense that they offer financial protection for your loved ones and the opportunity to create wealth through market-linked returns on the systematic investments. They offer a great degree of flexibility in terms of different fund options to invest in,
Reading the key features document (KFD) after purchase is usually skipped by consumers and is a mistake that should be avoided at all costs. All life insurance products have a 15-day free-look period from the date of policy issuance and is mandated by the Insurance Regulatory and Development Authority (IRDAI) to protect consumer interests. In this period, policyholders may opt to cancel the recently purchased policy if they feel it is not suited to their requirements or was sold to them with promises that are not mentioned in the KFD.
Timely premium payments and ignoring promotional calls from marketers are essential to take maximum benefit from the life insurance cover purchased. It is important to not miss any of the due dates for premium payment to continue benefitting from policy coverage or to prevent it from lapsing. Hence, it is advisable to pay premiums through ECS/NACH route in which money is remitted to the insurer directly from the account linked with the policy
Always inform all dependents and immediate family members about the details of life insurance policies purchased so that they can avail of its benefits in your absence. It is best to store the policy document in both digital and physical formats so that it can be easily retrieved when needed. Details of how the death benefit needs to be utilized can also be shared with family members so that all money is used wisely to secure their future.