Questions to ask before you buy Life Insurance policy.

Questions to ask before you buy Life Insurance policy.

Questions to ask before you buy Life Insurance policy.

by March 1, 2017
Life Insurance Cover

It is very important to understand a life insurance policy and the benefits that come with it before you buy one.

It is good to listen to your peers, friends, colleagues, and family members who understand insurance better than you. However, it is very important to do your research. Insurance companies often do extensive research on the markets to create tailor-made insurance policies for all types of customers. It is your duty to study and understand the policy that would best suit your needs, and then apply online for Health insurance policy /Lifeinsurance policy.

You might have wondered what factors to consider before selecting the life Insurance policy from the plethora of choices that are available. Here are some questions that should be answered before you choose the policy:


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1. What’s your life stage? The life Insurance for a 45-year old father of two children will be completely different from the life Insurance requirements for a 25-year-old. What stage of life are you in? Choose an insurance policy accordingly to ensure that you get maximum cover at a relatively cheap premium. We recommend everyone to start young and buy a good life insurance policy as soon as you start earning.

2. What are your liabilities? If the unfortunate event of your untimely demise occurs, it is important to ensure that your liabilities, if any, do not become a burden on your family. To take care of this, factor your liabilities before selecting the insurance cover. For example: If you have a home loan of Rs. 50 Lakh, it is important to ensure that the sum assured is much more so that the family doesn’t have the unnecessary burden of paying back such loans if the unfortunate happens.


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3. How much can you ideally keep aside for life insurance? Whether you are a professional who earns a salary every month, or as a person running your enterprise, it is a good practice to provision for your expenses and have a goal on savings. Once you have a grip on how much you can save, decide what you can set aside per month towards insurance. Then, you can go to insurance comparison portals to identify the best options as per your requirements and what you can afford to pay as premium. It is advisable to take the help of a financial consultant to understand the policy you opt for in finer detail.

Permanent Disability

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4. What’s the sum assured and what are the riders? Before you buy the insurance, understand what the sum assured is i.e. what your family would receive in case the unfortunate happens to you. Also, understand the riders in the policy.

Riders are any additional benefit that you can get over and above the coverage in the policy by paying a nominal additional amount. These riders could be in the case of critical illness, permanent disability, etc.

Return on Investmen

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5. What is the return on investment? In endowment plans or ULIPs, a part of the premium paid is invested in asset classes like equity to generate returns for you. Check if the returns after factoring in the inflation justify the selection of an endowment plan. Do understand the policy in detail and check if there are other investment avenues which can give you better returns.

We recommend a simple approach to select a Life Insurance policy:

  1. Buy a term plan to ensure that you get the largest possible cover for your life at a lesser, and more importantly, affordable premium. This term plan should cover all your liabilities and ensure that your family receives a good sum of money to manage their lives.

  2. Once you have your life covered well, you can use the remaining savings to invest in avenues such as equity and mutual funds to earn a better return on investments and secure your future. What’s more, the life insurance policy, as well as investment in avenues such as Equity Linked Saving Schemes (ELSS), can help you to save taxes under section 80C.