Life is uncertain, and anything can happen without so much as a warning. A life insurance plan helps provide that cushion that protects your family’s finances amid such uncertainties. Such a policy will help your family members pay for their expenses when you are no longer there to provide for them.
However, when it is time to take the first step in buying a life insurance policy, most people are often confused and don’t know where to start. Things like life insurance meaning, choosing the best plan, policy period, etc., can make it challenging to make the right choice. To help and guide you make a sound decision, here are some tips.
Consider Your Dependents and Life Stage to Determine the Coverage Amount
Our dependents vary at different stages of life. The financial responsibility of a single person is not the same as someone who is married and has children. Therefore, the cover amount should be chosen carefully. Make sure that your life insurance allows you to expand the coverage to encompass your growing responsibilities.
Keep Their Future and Lifestyle Needs in Mind
Other than considering the dependent family members, your insurance policy coverage should also take your family’s current lifestyle into account. Evaluate the amount of funds you will need to sustain that lifestyle. Don’t forget to account for inflation when you are calculating the premium for your life insurance online. You should plan your life cover according to this information.
Cover Amount Should Factor in Your Family’s Needs and Not Just Your Income
It doesn’t matter if you are the sole earning member or a contributing member to the family’s income. Your cover amount should be equal to the amount required by your family to pay the bills comfortably and sustain their lifestyle, even when you are gone.
Account for Liabilities in Your Cover Amount
It is common for people to incur various liabilities during their lifetime, such as home loan, car loan, personal loans, etc. When you are calculating your cover amount, make sure that you have included these liabilities too. At the end of the day, your family should be able to pay for the essential expenses along with the outstanding loans.
Use the Online Calculator to Calculate the Accurate Life Cover
You can check the websites of several insurance providers, such as Max Life Insurance, to look for available life insurance products. Most of these insurers also offer tools, like online calculators, that help you determine the cover amount accurately. Be sure to leverage these tools to make an informed decision. You will have to enter pertinent details, such as your current income, liabilities, future needs, etc., for it to calculate the optimum life cover.
Compare Policies Online
It is now very easy to buy life insurance online. There are many insurance companies that offer competitive products and a variety of plans. So, be sure to compare these policies and do your homework before making the investment.
Look for a High Claim Settlement Ratio
When you have chosen the right cover amount for your life insurance, the next step is to look for an insurance provider with the highest claim settlement ratio. As the name suggests, the claim settlement ratio is the number that represents the amount of claims settled with regards to number of claims filed.
When the claim settlement ratio is high, it means you have a good chance that your sum assured will be paid to the policy beneficiary when the time comes. It would be best to look for an insurer with at least 85-90% claim settlement ratio.
Supplement Your Policy with Riders
Riders are add-on options that help you expand the coverage of your life insurance policy. Other than the death benefit that your family receives, you can also extend the benefits of your term plan by adding riders to it. For example, loss of employment cover, critical illness, disability cover, etc., can help you protect against life’s uncertainties.
Make Full Disclosure to Your Insurance Provider
Don’t try to hide facts in order to lower your premium. Make full disclosure of your lifestyle, like if you are a smoker, consumption of alcohol, working in a hazardous industry, etc. Be sure to inform about these details to your insurance provider.
You must also reveal any pre-existing medical conditions or a family history of critical illnesses. These factors will help them assess your risk profile accurately and ensure that your policy nominee receives the death benefit.
Read the Policy Document
Don’t just buy a life insurance policy because it is cheap. You need to understand what it includes and excludes. Read the policy document to educate yourself about the terms and conditions before making the investment. It would help if you also found out everything about the lock-in period and the circumstances in which the claim may be rejected.
Invest at an Early Age
Did you know that your premium will be much lower if you are young? Therefore, you can save significantly if you buy a life insurance plan at an early age. You can start with low coverage and enhance the policy with riders as your income grows.
Life insurance is a necessary financial tool that you must add to your investment portfolio. Keep these things in mind and do thorough research before making any financial decision.