Four checkboxes before choosing a life insurance plan
Life insurance is the cornerstone of financial planning and should be one of the starting points for investing in financial assets with other savings vehicles. A positive result of the pandemic is that many people have started to take their financial planning more seriously than before and are making conscious efforts to protect their financial future by purchasing term plans at an early age. As a diversified financial asset, life insurance is useful in achieving goals at different stages of life.
While purchasing insurance is relatively quick and convenient in today’s digital world, check these four important boxes before choosing your plan:
1. Take an assessment: Understand your life goals. Each individual has a different life course and ambitions, and their goals also differ. An ideal life insurance policy should match your predefined goals and protect the future of your dependents. This could include paying for your child’s education and marriage, taking out a loan or paying off debts, covering health and disability costs, and building a pension corpus.
If you want a policy with affordable premiums and high coverage, then a term plan is your best bet. You can also consider investing in a ULIP (Unit Linked Insurance Plan) or retirement plan for regular income in order to enjoy a comfortable retirement.
2. Do your research: Read carefully before deciding on a specific insurance plan from the plethora of products available on the market. Find out about the type of policy and its different advantages.
For example, while a term plan will help achieve long term goals such as building a retirement fund, a children’s insurance plan will secure your child’s future in several ways. An accumulation policy offers the combined benefits of life insurance and regular savings over a period of time, and provides you with lump sum returns. A thorough understanding of your policy will help avoid obstacles later and especially when filing a claim.
3. Reduction of your temporary coverage: While choosing the right plan is important, choosing the right sum insured becomes essential. The sum insured depends on the Life Value (VHL) or financial value of the policyholder and takes into account income, expenses, future responsibilities and obligations, as well as financial goals at different stages of the life cycle. life.
If there is no single rule for calculating the exact length of coverage, one should keep at least 15 times the annual salary for a smooth life of dependents. Much also depends on the predefined and ever-changing life goals of the individual and the family. It is therefore advisable to calculate the sum insured at long intervals in life.
4. Don’t let your policy expire: Make sure you never stop paying your annual premium until the end of the term. This will ensure a steady stream of various benefits as well as financial protection for dependents and give them assurance and security forever.
If you keep these basic but important tips in mind, your insurance journey from the moment you purchase a plan will go smoothly with little to no issues along the way. This will provide financial protection for you and your loved ones now and in the future.
The author is Director of Strategy at Exide Life Insurance. The opinions expressed are those of the author.