How to Buy the Right Insurance?

Insurance companies in India calculate their success in the form of how much premium they collect from their customers for the insurance products rather than in terms of how much life cover they provide. Even the Insurance Regulatory and Development Authority of India (IRDAI) calculates the success of insurance companies in terms of per capita premium collected rather than life cover provided.

Most policyholders are aware of how much premium they pay for their insurance policy but not how much life cover their family would receive in the unfortunate event of the demise of the life insured. It is important to know how much life cover you will receive for the premium you pay over the policy term.

Nowadays, insurance providers in India focus on pushing insurance cum investment plans rather than the traditional term insurance plans. One main reason being, insurance agents receive higher commission for selling investment plans than term insurance plans. Customers prefer investment plans to term insurance plans as the former comes with a lot of perks such as savings, maturity benefit, and bonuses.

Concept of a life insurance plan

Insurance plans basically operate on the concept that the policyholder will be paid compensation for a specified loss by the insurance provider for a premium paid by the policyholder over a policy term. The specified loss can be a disability, death, critical illness, pregnancy related complications or any number of things. The policy term of a term insurance plan can range from minimum 5 years to maximum 30 years and above.

The premium payments for an insurance cover can be made on monthly, quarterly, semi-annual or annual basis. There are also single premium policies, wherein you pay premium just once, at the time of policy inception. Death benefit, surrender benefit, and maturity benefit are some of the benefits offered under life insurance cum insurance plans. Term insurance on the other hand offers only life cover which is payable to the nominee in the unfortunate event of the demise of the life insured within a specified time period.

Factors to consider when choosing a life insurance plan

Customers have varying insurance needs. Keeping this in mind, insurance companies offer a range of insurance products, designed specifically to suit the varying needs of its customers. From term insurance and child plans to investment and retirement plans, insurance companies in India offer a whole gamut of insurance products. Therefore, it can be confusing to decide on the right insurance policy for you. The following are the factors one should consider when choosing a life insurance plan:

• Premium: The insurance plan you buy should be affordable. Term insurance plans usually come with lower premiums while ULIPs and endowment plans have higher premiums as the benefits offered are vast.

• Life Cover: Ensure you get minimum 10 years’ worth of income as life cover for the premium you fork out for the insurance plan. Assess your family’s financial needs and accordingly choose a plan with sufficient life cover.

• Riders: The chosen insurance plan should give you the option to add riders for enhanced protection such as term benefit, critical illness benefit, and accident benefit riders.

• Monthly income benefit: Investment cum insurance plans provide monthly income to help the policyholders meet their financial requirements at certain stages of their life such as children’s education, wedding, starting a business, etc.

• Additional benefits: Partial withdrawals, bonuses, and special discounts for women are some of the other benefits offered by insurance providers to encourage customers to invest in different insurance products.

First, assess your insurance needs. Find out if you what you want is a traditional life cover benefit or a comprehensive life insurance plan that offers a savings element along with protection. Then, contact an insurance advisor to help you choose an insurance plan that best suits your needs.