Buying a life insurance policy need not be complicated, especially these days when the entire process can be conducted online. However, it is an important decision and ought to be done right.
Here are 10 steps you can follow when buying life insurance.
1. Understand your goals
When looking to buy a life insurance plan, it is not ideal to dive straight into buying one or even start browsing for them. One of the first things to do is to take a step back and assess your goals. If you do not have any goals at present, start by setting them. You may start by finding the answers to “What do I want to achieve in the long term?”, “Where do I want to be in the next 10 years?”, or “How do I want to provide for my family?” Once you have these goals in mind, or on paper, you may find the process of buying a life insurance policy easier and more meaningful.
2. Decide your coverage
One of the most important aspects of a life insurance plan is the coverage, or the sum assured. It is the factor that defines the benefit that your nominee, or nominees, will be able to claim from your policy. It also defines the benefits you may be able to claim from the policy.
Ideally, it is prescribed that your sum assured be at least 10x to 15x of your current annual income. This will allow you to keep your family financially prepared to face the expected as well as the unexpected for the next few years. However, you can decide the sum assured based on your goals and what is right for you.
3. Choose the type of policy
There are a few different types of life insurance plans available in the market today, offered by a number of insurance providers. Each type of plan offers some unique benefit or feature over the other. For example, term life plans are known to be affordable and simple in design, whereas ULIPs are known to offer market-linked growth opportunities.
Look at what each type of life insurance policy has to offer. Compare their pros and cons and decide which one would you like to buy.
4. Choose the term of the coverage
The number of years the policy will cover you is another important factor that you need to consider before you lock-in the details of the policy. How long should your policy duration be? Ideally, your life insurance policy should cover you for at least as long as the last of your family members are dependent on you. You may also choose the duration to be the length of your working years.
5. Use a premium calculator
Online life insurance premium calculators are an easy way to get a clearer picture of what your premiums may look like for the sum assured and the term duration you desire. Once you know what sum assured you seek, and for how long you want your policy to cover you, you can find a relevant calculator and use it to get estimates.
To begin using a life insurance premium calculator, you may have to start by putting in your personal details such as your age, your city, smoking habits, and more. This should help the calculator get more accurate results for you.
6. Shortlist policies
It is now time to figure out which policies suit you best. You can start by looking for a life insurance policy online. It is not necessary to pick one policy out of many right away. Instead, start to shortlist policies to then choose your ideal life insurance plan. You can look at the websites of various insurance providers or look at third-party aggregator websites to look for plans you like.
7. Check for the claim settlement ratio
Choosing the right insurer is as important as choosing the right policy. But how do you choose the right insurer? One of the ways to choose a suitable insurer alongside deciding how to buy life insurance is by checking the claim settlement ratio. It is the percentage of claims successfully settled in the past year. The higher the claim settlement ratio, the higher the chances of your claim being settled, it is believed. Hence, it is ideal to look for an insurer with a high claim settlement ratio.
8. Choose riders
Riders are available with almost every life insurance policy. You can either check the plan page on the website of the insurance provider or consult with an insurance agent or the insurer’s customer service representative to check whether and which riders are available with your plan. Remember that adding riders is bound to increase the cost of your plan. Hence, only choose the riders you need.
9. Decide whether to buy online or offline
Each mode of purchase has its pros and cons. One of the biggest pros of buying a life insurance policy online is that the costs tend to be lower than buying offline. Once you have decided how to buy life insurance for yourself, it is time to make the purchase.
10. Read the policy document
The process does not end with making the purchase. One of the most important things to do after you have made the purchase is to read the policy document. This will help you get a better understanding of the nuances of your policy.
These are 10 steps which you can follow if you are confused or lost about how to buy life insurance. In case of any doubts or questions, you can always consult the insurance provider or an insurance agent.