Being risk averse and ensuring adequate life insurance coverage is a critical aspect of an individual’s financial planning and investment objectives. One needs to consider a variety of factors before zeroing in on the right kind of insurance coverage that would help in meeting the immediate or future needs. Here is a list of 10 things one should be aware of before buying life insurance.
BE ADVISED THAT INSURANCE IS NOT AN INVESTMENTEvery individual looking to buy life insurance should understand that insurance should not be considered as a means of investment. Rather it should be considered as a means of security to help take care of any unforeseen circumstances in the future. You might find things to be hunky dory today but what if you are not there today. Who do you think will take care of the requirements of your dependents? This is exactly the reason why you need adequate insurance.
EVERYONE NEEDS INSURANCE
It’s a myth that if you are young and just beginning to take care of responsibilities, you don’t need insurance. As a matter of fact, insurance is a very critical aspect of financial planning and securing your future and you need to ensure the safety and security of your near and dear ones no matter what phase of life you are in.
HOW MUCH INSURANCE DO YOU NEED?
Next up, you need to decide the amount of insurance coverage you would need. Reviewing your current lifestyle and expenses, the immediate and future needs of your dependents as well as your current liabilities should give you a good indication of the amount of insurance or risk cover you would need. You can also make use of any of the online calculators that will help you arrive at an initial estimate. Consulting a specialist to understand specific requirements would also be a good idea.
TYPE OF INSURANCE
Next up, based on your investment needs and the applicable risk coverage, you need to determine the type of insurance that is best suited for you. There are a variety of insurance schemes available starting from pure term insurance plans that provide high-risk cover for a fairly low cost; ULIP plans and endowment plans that provide you the dual benefits of investment and insurance; and lastly the health insurance and annuity plans that help you take care of healthcare needs and retirement planning respectively. You should pick and choose the schemes that best suits your needs.
CLOSELY REVIEW THE CHARGES
Know the type of charges you would be expected to pay during the life cycle of the policy. There are a variety of charges or fees applicable based on the type of polices you opt for. Do ensure that you review the charges appropriately before signing on the dotted line.
DISCLOSE ALL FACTS
When you sign up for an insurance policy, ensure that you are not withholding any facts related to your health/medical history. Withholding critical information can lead to problems in the future when you attempt to claim the insurance benefits.
KNOW THE TENURE OF THE POLICY
Knowing the duration of the policy is an important aspect to consider when buying an life insurance policy. Life insurance plans come with a variety of tenures that cover different stages of one’s lifespan. While premiums are lower when you are young, it tends to increase overtime as you grow older. The bottom line here is to try and get the maximum tenure or coverage for your insurance policy.
KNOW ABOUT POLICY EXCLUSIONS
It can get quite boring to read through the policy terms and conditions but nevertheless it’s important that you go through the exclusions or aspects not covered under the policy in detail before you sign up for a policy.
Once you decide up the type of insurance, it’s time to review and compare the pricing and features of policies on offer by different insurance providers. There are many websites who provide tools to quickly run a comparison of different insurance products. Also, do not always base your decisions on the amount of premium you need to pay as there can be various other factors that impact the costing, features and benefits of an insurance policy.