Before choosing a policy
10 things to know before you choose a new insurance policy
How much of the family income do you provide? Does anyone else depend on you financially? How will your family pay final expenses and repay debts after your death? Based on the answers to these questions, calculate the coverage you need.
- Decide on the kind of policy you need
Will it be a term policy or a saving product? Or will it be an investment product or a pension policy, or a combination of all of these?
- One big policy or many small policies
Yes! You can choose to have several policies too! Diversify policies for goals not for spreading your premiums. It is best to consolidate death benefits and save on paper work and co-ordination.
- How much premium should you pay?
Only commit what you are comfortable committing on an annual basis over the long term. If this means a larger term policy and fewer savings policies, then so be it.
- Know your goals: Don't focus only on tax savings
Always remember the purpose of insurance is to protect your loved ones, tax saving is only incidental because the government uses it as encouragement for you to secure your family as part of its social goals.Know why you are taking insurance. It may be one of the below:
- Expense protection: Protect your loved ones in case of your death.
- Liability protection: Cover loans so that in case of death, these are paid off and your loved ones don't have to worry about it.
- Goal protection: Securing children's education and marriage and your retirement come in this category.
- Choose an insurance provider
Don't restrict your choices. For example if Company A is good at investment products, choose A for investment products and if Company B is cheaper with term products- choose B for your term products. However,always ensure service levels are good before making a choice.
- Providing all information
Fill the proposal form very carefully and personally. As you are responsible for its contents, ensure that the information you give cannot be disputed during a claim. Also ensure that all questions are explained correctly to you and that you have understood them completely. You have to give a declaration to this effect in the proposal form.
- Why a claims settlement ratio is important
The claims settlement ratio of a company helps evaluate what percentage of claims made with an insurance provider are honored.
- Choose offline/ online solutions
Online is a more do-it-yourself cheaper option, while offline offers the benefit of having an advisor to guide you or support your family's claims
- Understand your policy thoroughly
Understand the risk factors, terms and conditions of the plan. Read the sales brochures and other promotional material carefully.
- Check the premium type
Your policy may offer you several modes of payment including Single or Regular Premium. A regular premium payment plan can be monthly, quarterly or annually.
- Know the tenure and benefits
Ensure that you are clear on the tenure/ length that the policy is active. Also understand the benefits available under the plan before and at Maturity.