Irrespective of what stage of life you are in, it’s essential to have some knowledge how to overcome difficult situations in your everyday routine. For instance, a 12-year-old should know how to cross a street without help; a senior citizen should know how to use a smartphone independently, or a 25-year-old should have some basic knowledge of investing his finances in the best way possible.
Talking about financial investments, you certainly can’t avoid life insurance. But, buying an appropriate life insurance policy can become quite exhaustive, simply because of the hard-to-understand insurance terminologies and the infinite types of insurance policies available in the market. To simplify the process, below is a list of the parameters you should consider before choosing the best insurance policy for yourself or your family.
- Picking the best type: Different life insurance policies offer different benefits. Term plans only provide life insurance, Endowment plans provide life insurance with long term savings and Unit Linked Insurance Plans or ULIPs provide life insurance with investment opportunity. If you are sure about why you want to purchase an insurance policy and what you expect in return from your investment, it will help you make the right choice.
- Additional benefits: You have a provision for adding benefits or add-ons to your existing life insurance policy to avail additional benefits. These are known as life insurance Riders can be added to the base policy at nominal additional costs.
- Collateral instrument: A life insurance policy does not just help you save finances by reducing your tax liability, but it also helps you borrow funds by serving as collateral. Life insurance plans with savings component (Endowment, Money Back, Guaranteed returns plans, etc.) are eligible for this. This is very beneficial for investors who want to take a loan but have limited assets.
- Premium payment: Deciding on how often you can pay your life insurance premium is crucial. You can pay the premium either as a whole or split it into monthly, quarterly or yearly installments. However, you should carefully analyze your financial condition before finalizing on the frequency of your premium payment.
- Rate of claim settlement: Just as you are evaluated on the basis of your credit score, as an insurance investor, you should review the claim settlement ratio of the insurer. This will help you get an idea of how many claims have been successfully settled by the company in previous years.
In short, investing in a life insurance policy is certainly beneficial to any investor, but one should keep the above facts in mind while negotiating with an insurance provider to bag the best deal.