Life insurance buying is fairly simple! You might have been told otherwise for years, but I assure you it is not all that complicated. Traditionally, Indians bought a life insurance policy after consulting with a third party advisor. They trusted the advisor enough to help him make the right purchase decisions.
However, the life insurance buying patterns have seen a shift in recent years. The consumer today is more equipped and informed to make his own decisions. Why then, do they continue to rely on others to tell them what the best financial decisions are?
Did you know that according to a 2015 Swiss Re research, a staggering 92% underinsurance prevails in a typical Indian household? Simply put, for every Rs.100 worth of insurance needed for an individual, they have only Rs.8. In fact, among Asian countries, India has the highest level of underinsurance.
There is no doubt that having a life insurance is crucial for securing the financial future of our loved ones. One should not leave a decision as important as this one to someone else. Letting this perspective guide you, ask yourselves – ‘wouldn’t it be better if I made my own life insurance buying decision?’
It is quite natural to be confused when deciding on the life insurance. Here are a few quick tips that should help you be your own advisor:
Goal-based buying: Most policyholders buy life insurance either as a means for savings or to save tax. The core objective of this product is often overlooked. You must remember that life insurance is first and foremost a protection product. Having an incorrect objective for buying life insurance is one of the reasons why many people end up not having adequate cover. So determine what it is you are trying to achieve and before deciding what you need!
Review your financial situation: Given the fact that you are buying a life insurance to take care of your family in your absence, you need to take into account your financial situation as it will impact your loved ones in the future. You should review your current income, liabilities, and aspects like various life stages including your kid’s education. Lifestyle plays an important role as it is a contributing factor to your expenses. This will guide you in determining the right amount of life cover, the right kind of insurance policy and its longevity.
Choose the right policy: Once you have decided on a product considering the aforementioned points, make sure you understand the policy completely. Here are a few points you to need to ask yourself before you buy the product: What does this policy include and exclude? What factors can increase/decrease the cost of premiums? When can you or company cancel the policy and is there a penalty? Can you change the beneficiary? Is the policy convertible and renewable? What are the terms of renewal?
Choose the right insurer: It is important to keep in mind that the insurer you choose will be your protection partner for the next several years. So, you need to take every step to know your life insurer before you decide on one. Here are some important indicators to pay attention to:
Claim settlement ratio: It shows number of claims settled by an insurer. The prime purpose of insurers is to ensure that they pay out to beneficiaries and support them in difficult time.
Customer service: Review what the existing customers think about the insurer. This is an important indication of the way the insurer treats its customers and their grievances.
Determine Sum Assured & Policy Term; request a quote.
Go online and start reading about the different policies and in case you want to follow it up with an indicative online quote, there are two key questions to be answered:
Sum assured: which life cover do I need to ensure my family is protected (typically 8 to 10 times of your current annual income)
Policy Term: Till what age do I want the policy to protect me? Most term policies offer coverage up to 80 years now.
Free Look period: After you have iidentified and bought a policy that’s best for your requirement, remember that you have an option called the Free Look period. If you have second thoughts, you have the option to refund the policy within 15 days of buying it within the free look period.
TAKING CHARGE
- Once you have decided on a product ensure you understand the policy completely
- It is crucial to take every step to know your life insurer before you zero down on one
- Most term policies offer coverage up to 80 years now
The writer is chief digital officer, Aegon Life Insurance
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