No matter what stage of life you’re in, there are some bits of knowledge you absolutely must have in order to survive: like crossing the street when you’re 13, or using a mobile phone when you’re above 50 or knowing how to invest money when you’re 25.
Life insurance is another such thing, and the right time to learn about it- any time between when you start earning money to when you’re forced to stop.
The first step? Choosing the perfect policy, and what we’ve prepared below is a list of 5 questions you must ask to ensure you get it.
1). Types of Life Insurance
Like most things in life, different life insurance policies offer different benefits. While choosing an insurance plan, it is important to be clear about why you want to purchase it- what your end goal is- and what you expect from it. Answering these two fundamental questions will help you zero-in on the exact type of policy you need.
Related: Types of Life Insurance
2). Premium Frequency
The next step is deciding how often you can afford to pay premium to keep your Insurance Plan active. You can either pay the entire premium amount in lump sum or you can pay it at regular intervals – monthly, quarterly or annually. The frequency of your premium paymentsshould be based on a thorough and practical assessment of your financial situation, which should be donekeeping in mind what’s most convenient for you.
As demonstrated above, insurance policies do not follow the one-size-fits-all approach. To meet disparate investor needs, companies offer add-ons that can be availed over and above your policy. These add-ons are called riders. You can avail riders for critical illnesses like heart attack, for death by accident, for income benefits, etc. Make sure you ask about these at the time of purchase.
4). Loan Against Insurance
A valuable feature of an insurance plan is that it not only provides financial protection and saves you money by reducing your tax liability, it can also serve as collateral while borrowing funds. As a policyholder, you have the right to avail a loan against your insurance policy which can be extremely beneficial for investors with limited assets. However, these loans are granted only against traditional policies like endowment and money back policies that offer both life cover and savings. Term insurance covers and ULIPs cannot be pledged as security.
5). Claim Settlement
The chief responsibility of your insurance company is to pay claim amounts and deliver maturity benefits. Just like insurers check your credit score before making a commitment, make sure you too select an insurance company that has a high claim settlement ratio- which you can check on IRDA’s official website- and a hassle-free claim process. Also ask your friends and family to share their personal experiences with a particular insurer before you commit. Remember, however, that the insurer might not be deliberately rejecting claims; there’s also the possibility of adverse selection, so try and find out why they were rejected.
Now that we’ve equipped you with the 5 basic questions you must ask before you choose an insurance provider to sign a contract with, make sure you get life insurance sooner rather than later. It won’t take time to get, but takes just a moment to lose.
"Knowing yourself is the beginning of all wisdom"- Aristotle -
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