How to find right insurance plan for you?
Shopping for life insurance? That is just what 25-year old Suraj was doing last week. At the beginning, he was amazed at the variety of choices. But quickly, that amazement turned into worry. That’s because it became difficult for him to make a choice--there were so many different types of life insurance plans available. Plus all the jargon and complex terminologies made him utterly confused.
So, Suraj made a common beginner’s mistake--he purchased the first plan he was eligible for; he did not check if it satisfied all his requirements, or if the premium was within his budget.
If you don’t know how to choose the right insurance plan, you too could make the same mistake Suraj did. But don’t worry, we’re here to help you.
Wondering how to select the right life insurance plan? Here are 4 guidelines to help identify the right policy for you.
1. Identify your needs
The first step to choosing a life insurance plan is to understand what you want from it. Here, you need to think of different key areas like the following:
1) The amount of life cover that you need
2) The age up to which you want to be covered by life insurance
3) The period during which you can pay that premium
4) Whether or not you want a savings element included in your plan
5) Whether or not you want an investment element included in your plan
6) Whether or not you want to increase protection using a rider
These needs will play an important role in deciding which plan is the right one for you. So, if you are wondering about how to select the right life insurance plan, this is the right place to begin.
There are many online tools that you can use to make your decisions easier. For example, if you want to identify your retirement needs before choosing a life insurance plan, our retirement planning calculator can help. Similarly, there are also online tools that help you calculate how much life cover you need.
2. Understand the different types of life insurance plans
By now, you know that there are different types of life insurance plans available. To make the right choice, you need to first understand each type of plan. We’ll make this easier for you by briefly explaining the main types of life insurance plans.
These life insurance plans offer you coverage for a specific term. In case of the policyholder’s demise, they pay out death benefits. However, in case the policyholder survives the whole policy term, there are usually no maturity benefits in a pure term insurance plan. That said, there are different types of term plans available with built-in features like Return of Premium, Maturity payout, etc.
Savings plans, also known as endowment plans, are life insurance plans that give you the benefit of insurance and savings. Like term plans, they also pay out death benefits. However, if the policyholder survives, these plans pay maturity benefits too.
Retirement plans are useful if you wish to secure your life after you retire. These plans generally pay out a lump sum amount to the policyholder at a certain age. Or, they offer regular income after a certain age. This way, it can help replace the policyholder’s salary or main income. In addition to this, they offer a life cover as well.
Also known as ULIPs, these life insurance plans give you the benefit of insurance and market-linked returns. They invest a portion of the premium amount in debt funds, equity funds or a mix of both. So, when the policy matures, you get to enjoy the returns of those investments..
These are the main types of life insurance plans. Also, there are many other beneficial features that different plans offer. Some examples are whole life cover, return of premium, waiver of premium, and cover for your spouse. Riders are also additional covers you can choose from. So, to know how to select the right life insurance plan for your needs, you need to understand your options correctly.
In addition to these three benefits of a regular term insurance plan, there’s also one more - tax benefits1 under Section 80C, 80D, and 10(10D) of the Income Tax Act, 1961. This is common across both the types of term insurance plans.and cover for your spouse. Riders are also additional covers you can choose from. So, to know how to select the right life insurance plan for your needs, you need to understand your options correctly.
3. Compare the plans that seem right for you
Once you have identified your needs and understood the different plans, you will find that some plans seem right for you, isn’t it? This list will be shorter than the entire range of options you have. But you still have to choose. So, to make this decision easier, you can compare the plans that cover your needs. There are comparison tools online that help you see which plan is more affordable, and which plan offers higher benefits. Compare the costs and benefits and make the choice that seems best for you.
4. Get to know the insurer
Lastly, before you make your purchase, get to know the insurer from whom you are buying your policy. Here are some areas to check
1) What is their claim settlement ratio like?
2) How is their customer support?
3) Is the company financially sound?
4) Are the existing customers happy with the insurer?
These questions will give you a good idea about the insurance company. You can then decide if you want to go ahead with them, or if you want to choose another insurer.
When you break it down like this, choosing a life insurance plan becomes much easier, right? These days, with most of the top insurers offering online solutions, you can even check out all the details from your phone or computer. Visiting a branch office to get the details and understand the plans is not a necessity anymore. So, before you purchase a life cover, make sure you understand how to select the right life insurance plan. Doing the required research can help you identify the perfect plan for you.
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