5 Things to Think Before Buying Life Insurance

As your responsibilities grow, it becomes increasingly important to protect the current and plan for the future. Life Insurance is an effective financial planning tool that provides multiple benefits ranging from Protection, Savings, Tax Benefits, etc. But before you purchase a life insurance policy, it’s important to be well equipped to choose a plan that meets your needs and requirements.

Keep these 5 things in mind as you go about your life insurance buying decision:

1. Buy for the Right Reason

Firstly, Understand the purpose of buying insurance. Remember that you are buying insurance to plan for some specific goals, cover your life and safeguard the financial future of your dependents. Do not buy insurance only for secondary benefits like tax savings.

2. Amount of Life Cover

Secondly, The premium amount is generate based on the life cover amount that you opt for. As a rule of thumb, You should have a life insurance cover of at least 10 times your annual income. You can also use our premium calculator to arrive at a premium estimate.

3. Policy Tenure

Thirdly, the ideal tenure of your Life Insurance Policy should be your ‘Retirement Age minus your Current Age’. This means that if you are currently 35 years old and wish to retire by the age of 65, your policy tenure should be 30 years or more. Popular term plans 

4. Additional Coverage & Benefits

Add-ons are additional benefits along with the base cover, such as critical illness rider, accidental death benefit rider, waiver of premium rider, disability rider, etc. These are beneficial additions which can be opted for by paying nominal premiums.

5. Credentials of the Life Insurance Company & its Claims Experience

And lastly before buying a life insurance policy, it’s important to assure yourself about the credentials of your chosen life insurance company.

1. Claims Settlement Ratio – This refers to the no. of claims paid by an insurance company for every 100 claims that were registered.

2. Assets Under Management (AUM) – This refers to the current market value of the funds managed by the financial services company. A higher AUM suggests that the portfolio is strong and performing well.

3. Solvency Ratio – This is a ratio use to measure the financial stability of a company. It reflects the company’s ability to settle its long-term debts. A higher solvency ratio means that a company is comfortably place to pay out claims. 

In addition to these, excellence in customer service, reviews and corporate governance practices give vital information about the overall performance of the company.

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