10 Important Things to know Before Buying Life Insurance
No financial planning can be complete without a life insurance policy. So if you are also doing your financial planning or doing it in the future, then it is advisable to know some important things about life insurance. I am telling you these things on the basis of my experience, I have worked in a private life insurance company for two years as a manager, so you can trust these things completely.
There are more than twenty life insurance companies in the market today. There is no shortage of options. Put up any TV channel, you will see the promotion of some insurance company. Some are selling children’s plans, some are luring them to pension plans. In such a situation, if you are confused about which plan to take, then it is not your fault.
Which plan is right for which person depends on many things. For example, at what stage of life he is, what are his responsibilities? A twenty-five-year-old and a forty-year-old will have different needs and different objectives. But there are some things that should be kept in mind while taking any life insurance policy. Today I will share some such things with you on Makfreelance.Com:
First of all, know how much life insurance you should have.
By “how much” here, I don’t mean the premium, but the sum assured. This is the money that the family members get on the death of the person.
Thumb Rule says that a normal person must have life insurance 10 – 12 times his annual earnings. For example: If your annual income is 5 lakhs, then you should have life insurance of 50 – 60 lakhs. The logic behind this is that if the person dies, then his family gets so much money in one go that if he is deposited somewhere safe, his interest should be around the annual earnings of the person and there is no financial crisis on the family.
Taking insurance of such an amount is not a big deal. If you want, you can take a term plan of a good company. A 28-year-old friend of mine recently got an insurance cover of Rs.50 lakh from Kotak Mahindra Life Insurance Co. for Rs.6700 per annum.
If you do not have insurance according to this calculation, then you should first arrange it and only then think about any other kind of investment. I have seen many seths paying a premium of lakhs of rupees annually and if we talk about their insurance amount, it is not even 20 lakh. You would call it stupid.
Get life insurance at an early age:
As the age increases, companies charge more premium for the same insurance amount. So it is better that you take life insurance at an early age. It is obvious that initially the income of the person is somewhat less, so you take the policy according to your budget and as the income increases and increase your life insurance cover by taking a new policy.
Try linking life insurance to a purpose:
When you add an objective to a policy, it becomes more than a piece of paper. In such a situation, the chances of this policy lapse are reduced… You have a reason to run it regularly. By having the objective, you do not waste your and advisor’s time in understanding useless plans and discuss only about the right policy.
So it is important that you know your purpose and choose the plan accordingly. Your aim may be to raise money for your retirement, children’s higher studies or something else, but if you are making tax saving your objective, then it is not an objective, it is just an added advantage of taking life insurance.
Unit linked insurance plans can be a good option:
If you want to invest your money for a minimum of 5 years, want tax benefit on that money, want life insurance cover and at the same time want a good return, then ULIP is a very good option. Especially since September 1, 2010, IRDA has reduced the charges of such policies and due to this it has become a very good option for customers.
Keep one thing in mind while taking these policies, buy them in monthly mode, because these policies are related to the stock market. And by paying the premium in the monthly mode, you greatly reduce the chance of loss. You can expect a return of 15-20% if you run this policy for a long time.
Now if you have to take a policy in annual mode to save tax, then you can also request the life insurance company to invest your money in monthly mode. Generally, some policies have this option, you can choose one of them.
There are also many options of funds in ULIP, do not leave the choice of fund to the advisor, but select the right fund according to your need only after consulting a knowledgeable person. You also have the facility to change your funds from time to time, take advantage of it.
Use websites to choose the right policy:
By visiting such websites, you can compare the plans of all companies and choose the best option for yourself. You must do this work because any advisor will just tell you the features of your product and try to tell you the best, but on these sites you will know everything.
You can try it: www.policybazaar.com
Use the Internet to buy a policy:
Most people take life insurance through an agent or advisor, but if you want, you can also buy a policy through the Internet. You can take advantage of this facility by visiting any company’s website. By doing this, your premium will be reduced somewhat, because now the company will not have to pay any commission to the advisor. But if you are consulting an advisor, please buy the policy from him. And keep in mind that pay only through premium cheque and never forget to take the receipt.
Give the insurance company the right information:
Life insurance has a principle, “Principle of Utmost Good Faith” according to which both the company and the customer have to give correct information to each other. For example: If someone has diabetes and does not tell this in the application form and he dies due to diabetes within a few years, then his family members will not get the insurance amount. Therefore, it is important that you give the right information to the life insurance company. It is better that you sit comfortably and fill the complete form in front of yourself or fill it. And keep a photocopy of it with you.
Don’t go for tempting promises:
If someone promises that he will double your money in three years, then never take a policy from him. According to IRDA rules, no life insurance company can show you returns of more than 10%, if someone is confusing you, then be careful. It may be that the company has given abnormal growth before, but there is no guarantee that this will always happen.
Take advantage of the free look period:
You can return your policy within 15 days of receiving the policy document. So even if you have taken a policy by mistake, it does not matter, you can return it and take your money or convert it to another plan.
Be sure to install a rider:
You can attach some additional coverage or riders with any policy. For example : Accident Death Benefit (ADB), Critical Illness (CI)rider. It costs very little to install a rider. You can get an ADB rider of one lakh rupees by paying only a hundred rupees extra. In case of death in an accident, the nominee will be paid twice the sum insured. Usually advisors do not tell about them, so it is important that you take care of them.
Friends, there is a similarity between life insurance and helmet in our country. Both are not taken for what they are made for, but there is some other selfishness in taking it. Life insurance is taken for tax saving and helmets are taken to avoid police fines. The real value of these two is also known only when a tragic incident occurs. So if you don’t have either of them, don’t wait to find out their true value, just get it as soon as possible. Thank you.
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