Moneycontrol
Jun 23, 2015 12:27 PM IST | Source: Moneycontrol.com

Buying life insurance cover? Do use these tips

Though there is a rule of thumb to buy at least 10 times life cover, it does not answer all issues pertaining to life insurance purchase. This article highlights other factors that you should keep in mind while buying a life insurance policy


Saroj Satapathy
Ideal Insurance Brokers


There are many instances in life when one comes to a point where they start thinking that if they could have taken a better decision. One such point in life is the decision to choose your insurance cover. Even after the much needed awareness drives and programs through various mediums, there are many who still cannot decide how much cover is good for them and when should they stop! The standard rule to follow is that your cover should be 10 times of your annual income for your family to stay comfortable even after you. However, there are other factors too that should be looked into while choosing the coverage for yourself:


Individual goals: You also need to assess the individual goals you have in life, your age, the kind of occupation the number of dependants and factors like these. Your goals will change with each stage of your life and hence the coverage needs to vary accordingly. For instance if you are single you would not have much to worry about but things will change once you are married and have kids. Needs change during the later stages of life, when the kids are settled one needs lesser insurance. Also, one may need a combination of policies to match different goals during the stages of life. Look for a need based policy rather than choosing life insurance as a tax saving instrument.


Clarity of the proposal and policy: Once you have made the decision of investing in one particular policy, it becomes mandatory to read the documents related to it carefully and minutely. You need to understand the implications and the actual benefits you will get. one of the most important document which binds the contract is the proposal form which need to be filled in by the proposer completing all the columns properly (for e.g. existing medical conditions or habits etc.) to avoid situations when your claim stands denied for a wrong, unintentional declaration.


Background of insurer: It is essential to run a background check on the company concerned. You can easily access website of any life insurance company to look at policy structure, customer service capabilities, network, online platform, claim payment capacity, actual settlement ratio in past etc. Further, you can find many sites that help you compare various policies as well as the premium. The insurance sector is very well regulated by IRDA and all companies need to maintain a solvency ratio to ensure that the customer does not suffer.


Cost of premium: Once you have selected the policy you will have to pay the premium to keep the policy active. This can be monthly, quarterly or yearly, depending upon the policy and your choice. While making a decision you need to make sure that you would be able to pay that amount when decided as failure to pay the premium will result in policy lapse.

Choosing the right intermediary: It is very important to chose an intermediary who possesses the right knowledge to answer all your questions and guide you in not only choosing the right cover but advises you on other related aspects stated above. Currently, there are numerous cases of mis-selling and it is pertinent to note that you must exercise the option of 'free look' period to understand the cover and premium to take a judicious decision of continuing with the policy or cancel and get full refund of premium paid by you till that date from the insurance company.

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