The process of saving and accumulating wealth to take care of your
family can take years or sometimes decades. I have strived my entire
career to build a stable financial base for my family. During this time,
I accumulated savings and investments to plan for future goals like
buying a first house and saving up for my daughter’s education. But
before I started saving up for these goals, I bought a life insurance
policy that covered my family’s financial needs. So that they would have
a monetary cushion in case of my sudden demise.
Life insurance is the fastest and easiest way to ensure that your family remains financially protected. It can clear debts, pay for a child’s education, bear medical expenses, and secure the business and assets of a family. Choosing the right life insurance product has not always been easy – but with a little foresight, it can be.
The ideal life insurance plan is affordable, can be tailored to your needs, and offers the right benefits.
There are many types of policies, and it is easy to be overwhelmed by the options available. Before you buy a life insurance policy, I recommend making the following checklist of requirements:
When you identify the objective for buying insurance, you will be able to pick the right one suited to your need. Your objectives could range from providing your family adequate financial cover in case of your early death, saving for a specific goal like funding a child’s education or generating income after a certain age (post-retirement).
It is vital to choose a plan that provides adequate financial cover, and there are different insurance products available to choose from. These include:
The life cover will help your family maintain their lifestyle in the unfortunate event of your death. To decide on the life cover, you need to keep in mind the major life events that will occur in the future. They include inflation, education of children, their marriage, your spouse’s income, retirement, etc. To calculate the minimum cover you need, use the common thumb rule of a life cover that is 10 times your annual income. If your current annual income is Rs 10 lakh, you should have a life cover worth at least Rs 1 crore.
The ‘term’ or the tenure of the insurance policy is largely defined by your current age and the age at which you plan to retire. It is critical that you get this right as this choice must be made at the time of buying the policy and once chosen, cannot be changed later.
Your policy should ideally start as soon as you start earning to lock in a lower premium. The policy duration should cover your working age up to retirement. Because if something were to happen to you in this duration, the term insurance money will replace your income and help your family manage their lives.
Also, remember, there’s no point in covering your life beyond 70 years of age. Because by then, you would have already crossed your working age and probably fulfilled most of your financial responsibilities.
Riders are extra benefits you can buy to add to a life insurance policy and provide added protection if you meet their conditions. The right rider benefits added to the basic policy enhance your coverage and protect against added risks. For instance, an accidental death benefit rider pays an additional amount in case of accidental death. A rider for critical illness offers a payout on diagnosis of the covered illness, which can help with medical expenses. The extra premiums for such riders are often nominal.
The Claim Settlement Ratio (CSR) is the percentage of claims an insurer settled out of the total claims received. Many view this as an indicator of a brand’s credibility. The higher the percentage, the better the claim settlement ratio of the company.
For many of us, filling out forms may seem taxing. But no matter what, do not skip this process. Providing accurate information is vital for the insurer for risk assessment so that they can provide you with the optimal insurance coverage, and any inaccuracies discovered may lead to claim rejection.
With so much happening in the world of life insurance products, all you need to do is follow this checklist, and you can never go wrong! Just make sure you do your research, avoid buying in a hurry, and look for the product that best suits your needs.