What is life insurance? It is a core component of every investment portfolio, guaranteeing your family’s financial security in case of any unforeseen event. However, buying these policies requires careful consideration on your part, along with following a few simple steps along the way. Here’s learning more about the steps to purchase life insurance and some basic information about the product.
Life Insurance Explained
Life insurance explained – it is a helpful product that guarantees your family’s financial security in case of your unfortunate demise within the policy period. The insurance company pays out the sum assured amount to the policyholder’s nominees in such instances. In return, you must pay a pre-agreed premium for a fixed policy tenure. However, choosing life insurance can sometimes take a lot of work, considering the plethora of options available across multiple insurers. Here is a guide to buying life insurance, including the major steps to follow in this regard.
6 Steps To Buying Life Insurance
Now that you know what is life insurance, here’s looking at a few crucial steps toward purchasing the same.
- Why Do You Require Life Insurance- Now you know what is life insurance, then you should also know why you require Life Insurance. The first step begins with asking yourself this question. Why do you require life insurance? Do you only need it to financially secure your family in the event of your absence, being the primary breadwinner? If you are an unmarried individual without any family or dependents, then you may not require as much life insurance coverage. Hence, analyzing your profile and needs is essential before purchasing.
- Choosing The Right Insurance Plan For Your Needs- Life insurance comes in several types. Pure term insurance coverage will give you coverage for a fixed tenure and does not have any maturity benefits if you survive the tenure. Whole life insurance covers you for a lifetime, and it may help in the future if you continue being the family’s sole breadwinner. Endowment plans and ULIPs offer both life coverage and maturity benefits of various types, and you can opt for these as savings/investment tools, obtaining life coverage simultaneously. Assess your needs and take financial advice to choose the best option that suits you to the hilt.
- Planning Your Coverage- Before signing on the dotted line, you should first understand the insurance coverage that you require. Choosing insufficient coverage will only make your family more vulnerable in the event of any unforeseen event. At the same time, an excessively high range will lead to costly premium payments that may jeopardize your other investments and monthly household budget. You can choose coverage that is between 10-20 times your annual income. You should also add the future educational needs of your children, other goals, and your current liabilities before arriving at the final figure that will suffice as insurance coverage. Do not forget to include inflation in your calculations.
- Comparing Different Life Insurance Plans- You can now look for insurance plans in your chosen category online. Once you go through plans from multiple companies, shortlist a few and compare them based on some parameters. These include the insurance company’s reputation, plan features, premium amount, inclusions and exclusions, and the claim settlement ratio. You can take professional advice in this regard as well.
- Application Submission And Other Formalities- Once you have chosen your insurance plan, you must fill out the application form and submit all necessary documents. Once you select a plan, go through the terms and conditions carefully. After that, you have to submit documents like identity and address proof, photograph, and PAN card, among others. Make sure that your details are accurate and without any errors. Be honest and do not conceal personal information while filling out the form. You can then get it submitted accordingly. The insurance provider may also schedule a medical examination afterward, checking whether you have any terminal illness.
- Start Premium Payments- Upon the completion of the medical examination, you can start paying the premium, and your policy will turn active. The insurance company will issue the formal approval within 7-10 days after your premium payment. You also have a free look period, which may vary between 15-30 days, during which you can return the policy if you find it unsuitable for your needs. You will get back your premium amount after the deduction of applicable charges.
After going through this you have the answer of what is life insurance and why you need life insurance. Hence, you should follow these key steps while buying a life insurance policy. However, you should not rush the process and do your homework carefully before finalizing your decision.