Buying an insurance policy has always been a tricky affair. In fact, most people find themselves in a spot while buying an insurance product. But no matter how much you dread these, you cannot ignore them either. After all, life insurance products provide security to not just you but your loved ones in every unwarranted situation. Hence, making an informed decision while buying life insurance is imperative and these few basic tips can only help you in making the right decision.
1. Buy early
It is best to buy life insurance at an early age as the cost of the insurance goes up as you grow old. This is primarily because on an average, the chances of death are lower with a younger person when compared to someone on the higher side of the age. For instance, if an individual aged 20 buys a term insurance plan of Rs 1 crore, he can get a cover for 50 years for an annual premium of Rs 7,000, which is effectively Rs 600 a month, equivalent to what you would spend on watching two movies a month. On the other hand, if you defer this decision by ten years and buy a cover as a 30-year-old for coverage till 70 years of age, your annual premium could range anywhere between Rs 8,500 to Rs 10,000. Similarly, it gets even more expensive as a 40-year-old when you buy plan for a 30-year period, your annual cost range anywhere between Rs 15,000 and Rs 30,000. This is primarily because of the risk of health issues and death is high as you grow old. Thus, this explains why buying an insurance plan at an early stage is a wise idea.
2. Identify your needs
It is important for you to exactly know the purpose of buying a life insurance product. Consider this; you are in an electronics store, planning to buy the best TV for your home. You have done your homework but you are confused. In such a scenario, how do you decide which is the best TV for you? Do you want a big screen but not a high-definition one? Or do you feel that buying a high-definition TV with a smaller screen is a better idea? Unless, you don’t know what you need, it is sheer waste of time for you to go to stores to compare. And something similar is the case with insurance. What is it that you are looking for?
So, if your main objective is to provide financial cushion to your family in the event of your death; it is advisable for you to buy term insurance as it provides pure insurance cover to your dependents at lower premiums. However, if you are looking at returns from your coverage, then term return of premium (TROP) plans are an option. Unlike the plain-vanilla term covers, here you would receive the premium back from the insurer, in case you survive the coverage period. The main problem with such plans is that the premiums are on a higher side compared to normal term plans. Similarly, if you objective is to buy cover for a specific need, say your child’s future, then you can go for a low-cost Ulip (unit linked insurance plans), primarily because it’s investment-linked plan and would help you grow money with some insurance coverage.
3. Compare and Analyse
After you have figured out the primary reason behind buying a life insurance plan, it is important to do your research thoroughly. Just like you would go online to read up about different destinations (what they offer, their prices, cost of total trip) before you zero in on the destination for your travel, you can refer to the online insurance portals for comparing and choosing the best plans. Simply enter your details and the websites will show all the available options with details of the insurer, type of plan, the duration of the cover, premiums etc. You can read more about the plan once you select it or you can simply pick up the phone and speak to the experts that these websites have on board and are ready to help. This will help you make an informed decision at the time of buying the best insurance plan for you and your family.
4. Understand the document
Wise words: Never buy something which you don’t understand. Buying an insurance plan is no exception to this golden rule. Just like you sit and go through the brochure of any product you are planning to buy for your home, you must do the same for insurance plans as well. Yes, the terms and conditions may seem difficult to understand but that’s why these websites have advisors, who will guide you through the process. Determine the sum assured and read the terms and conditions carefully. It would be advisable that you consult an expert to get a better understanding of the policy. Ask till you are not satisfied. Unless, fully convinced, do not sign the document.
While there are many more things that one should remember while buying a life insurance, the above simple tips are just a few to start with.
By Yashish Dahiya, Co-founder & CEO, Policybazaar.com
