All You Need to Know Before Buying a Life Insurance Policy

Buying a life insurance is a very important decision of your life. It is a simple solution for many problems. While many people make the big decision of buying life insurance, not all of them understand it fully and that’s why they are not able to buy the right product for themselves. Even with the availability of online insurance, many people rely upon agents and brokers for making them familiar with a life insurance policy, but if you don’t even know the basics of life insurance there are chances that the agent and broker can fool you easily by selling a policy which will give him maximum commission instead of selling a policy which will could have given you maximum benefit.

Through this article we will try to cover the basic points which you need to know before buying a life insurance policy because the more you know about life insurance policy, the more benefit you will be able to get out of it.

Following are the things, you need to know before buying a life insurance policy: -

Why do you need life insurance?

First of all, you need to understand the basic reason for buying a life insurance. Cover for risk of death is not the only purpose for buying a life insurance policy. Life insurance policy can be used to pay loan, debt and college education expense. Life insurance can also be purchased as a retirement plan with regular income. Some people buy life insurance as a form of investment while others buy it for covering final expenses such as funeral cost. You need to define your need which will help you in buying an insurance policy accordingly.

Which type of life insurance do you need?

If you need an insurance plan with low rate of premium to fit into your budget with specified policy term like 15 or 20 years, then you can go for term insurance policy. But if you need a policy which covers you for your whole life, then you can go for permanent life insurance policy. Both term and permanent insurance policy have their own pros and cons like in the case of a term insurance plan, there is no cash value but it gives highest death benefit available at the lowest cost while in case of life insurance policy the premium rates are high but it also acts as a tax deductible form of saving.

How much cover do you need?

Before buying a life insurance policy or even looking into the options available, you need to decide the amount of cover you need. By deciding upon the coverage amount, you set the first pillar of base for searching a right life insurance policy. When deciding upon the coverage amount always consider your lifestyle, future obligation, number of dependents, debts and inflation in consideration. These parameters will help you shape coverage amount in the right form. 

 

Who is the insurer, insured, beneficiary and owner?

It is better to understand the basic terminology of life insurance policy to avoid any confusion while understanding your policy, whether it is through the internet or through an agent or broker.

Insurer- The insurance company which provides you insurance through contract and is responsible for your coverage.

Insured- The person whose life is covered under the policy which he has bought.

Beneficiary- The person who is eligible to get the life insurance claim or death benefit.

Owner- The person who is responsible for the payment of premium.

What is a rider and which type of riders are available?

A rider is an additional provision which you can add to your life insurance policy by paying extra premium. Like there is an availability of Critical illness rider, which after addition to your life insurance policy, gives coverage for specified illness by paying extra premium. There are numbers of riders available like accidental death rider, partial or permanent disability rider, income benefit rider, etc. Each rider has its own benefit and is available with different plans. You need to check which riders are available with which plans.

What If I don’t die during the policy term?

Many people have this concern that what will happen if I survive the policy term. Term plans do not offer survival benefit, only death benefit is payable but there are some term plans which returns all the premiums paid. For endowment plans , there is a maturity benefit under the plan which is payable to the life insured on the completion of the policy term,

What if I am not satisfied after buying a life insurance policy?

If you are not satisfied with your plan after buying it, you have a free look  period of generally 15-30 days  which starts after receiving your policy document with in which you can cancel your policy and get full refund.

What are the inclusion and exclusion under the policy?

Inclusions are the terms and conditions which are included in the policy while exclusions are the term and conditions which are not covered under your policy.

What if I fail to pay the premium?

If you fail to pay the premium on the due date, you have the availability of grace period (varies from plan to plan) which gives additional time after the due date to pay the premium.If  you still did not pay in the grace period, your policy will go into a lapse mode and all the benefits under the policy will cease.

What if I already have a policy?

If you already have an insurance policy, don’t replace it without understanding the consequences. You can end up opting for a costly policy than your previous one.

Just by knowing some basics of life insurance policy, you can shape your search in a more specific direction towards creating a pool of some of the best life insurance in India. It helps you to choose the best insurance plans for you and you will never be fooled by any agent or broker for their own benefit.