In India, insurance is mostly sold as a tool to achieve your financial goals like retirement planning, child education or mostly for tax planning. But none of these reasons should be the criteria for buying a life insurance product. The main reason for buying a life insurance policy should always be seeking protection against financial hardships a family would go through in case of death of the main bread earner.
Life insurance products are also very complex in nature and people often find them dangling with the following questions; let’s understand how to buy the right insurance policy.
1. What kind of life insurance should I buy?
This is the most critical question as a wrong product will defy the whole purpose of buying the policy itself. Life insurance products come in all shapes and sizes with no one size fit for all. We have term insurance/ money-back plan/ Ulips/ pension plan/ whole life insurance and endowment insurance. I suggest you to go for pure term insurance policy only, the best and the purest form of insurance; it offers very high insurance cover at a very low price.
2. How to choose the company?
The saying “Ek anar aur so bimaar” applies aptly on insurance industry as there are as many as 24 insurance companies in India offering numerous life insurance products, making it very difficult to select. A simple test to decide which company to look for could be its claim settlement ratio i.e. how many claims it honors every year apart from its market standing and term and condition of your policy document, its pricing. Buy a policy considering all the facts.
3. How much insurance cover should I opt for?
It depends on your age, number of dependants, outstanding liabilities, existing assets, monthly expenses, future ones like childrens education and marriage. You should buy a cover which provides enough money to manage the above mentioned events and expenses. Choose your cover diligently or at least buy a policy cover which is 8 to 10 times of your income apart from covering your outstanding loans.
4. What is the time frame/ hours I am looking at?
Always buy a policy for the number of years you intend to work as after that ideally your investment should give you a real insurance cover. You should always build solid assets like gold/properties/cash/FDs/MFs or shares et al in long run than depends on the policies, though initially buying policies would be the need of the hour.
These are some questions you need to ask before you buy a policy. Each factor needs to be researched thoroughly based on the various parameters as mentioned in the article. If you are super rich or win a lottery, you don’t need to worry about life insurance. So be smart and buy smart!
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