Life insurance is undoubtedly the most crucial part in any financial portfolio. Investments, tax saving, etc make sense only when life is insured for any unforeseen event. Though this aspect is acknowledged by many people, lot of them falter while choosing a life insurance policy. There are multiple reasons for this. Let’s look at five questions to ask yourself before buying life insurance so that you end up doing the right things right.
1) What type of plan do you need?
This is the very basic question you need to ask yourself. There are multiple types of life insurance policies available in the market. Choosing one which suits you is the first step towards purchasing one. Traditional policies, money back policies, ULIPs, term plans and so on are the popular ones among the many types of plans available. But, most of these offer dual benefits of insurance and investment and finally end up giving none. Hence, the best one to go for is term plan. You can compare and choose an online term plan.
2) How much Insurance is needed?
Lot of times we know that insurance is needed, but how much is needed is not known. To make it simple, know the current expenses of the family and see how much of amount is needed to generate this amount for the next 25-30 years, depending on the life expectancy of the dependant. However, to get accurate values, you can use any life insurance calculator. Purchasing random amount of insurance is not advisable since you may be short of the realistic values. Sometimes, you may even purchase more than what is needed.
3) Who needs Insurance?
Who should be the insured person in your family is also a question you need to answer. It is not very complicated, though. The earning person should be the one on whom life insurance needs to be taken. Also, you can only purchase life insurance on yourself or on someone with whom you have blood relationship such as wife, son, etc. Avoid taking life insurance on those who are not earning.
4) What should be the tenure you should opt for?
There are different types of tenures available in different life insurance policies unlike a PPF. They are usually available in tenures of 5, 10, 15, 20 years and so on. Term plans even offer up to 30-35 years of insurance. Ideally, the tenure of the policy should match your retirement age. After that, you might not need life insurance since you would have anyways accumulated sufficient amount for your family’s future expenses.
5) How to select the Insurance Company?
Finally, once you have answered the above four questions, you need to select an insurance company and the right policy from that company. Important factors which you should look for while selecting an insurance company are claim settlement ratio, claims pending, premiums and riders. A lot of the top insurance companies now have online plans available. You can purchase them directly from their portals or from any aggregate insurance portal.