According to IRDA, India’s insurance regulator, there are 24 registered companies that sell life insurance plans. That’s 24 companies using every ounce of their marketing power to convert you into one of their customers.
While deciding to insure your life for your loved ones future is important, buying the right plan is even more crucial for a wrong plan can cause more harm than good.
The key to buying the right plan is to ask the right questions to the insurance company. Here are five questions you must ask before you buy an insurance plan.
1. Which Policy Do You Offer?
There are two types of life insurance policies: one which pays a death benefit on your demise and one which invests your premiums while also providing life protection.
You should ask the insurance company to explain the benefits of each plan they offer. Why are they better than their competitors? What are the inclusions and exclusions? Get these questions answered and then decide how it will suit your needs.
2. What Is The Cover Amount?
When you are looking to buy life insurance, it is the cover, the sum your nominees receive, that matters the most.
Take a stock of your present cash flows and financial goals; compare them with your assets and any liabilities. The gap is your insurance cover.
Remember the thumb rule: your insurance cover should be 10 times your premium amount. Calculate your Human Life Value.
3. What Happens If I Exit The Policy Midway?
Insurance plans are long-term products. An occasion may arise when you are unsatisfied with your product and may wish to surrender it. In these cases, insurers may charge you an exit or surrender charge. It is best to be informed of such charges at the start.
4. What Are The Tax Benefits?
Most people buy life insurance because they wish to save tax. While life plans were designed to secure your love ones’ future, the tax benefits often beat out any other benefit while luring customers.
Ask the insurance office about tax benefits and how much you can save. Maybe you can invest in another policy with the savings.
5. How Much Do I Need To Pay?
Money matters. When you speak to the insurance firm, it is the charges that most people think of. From ULIPs to Term Plans to Endowment Plans, there are different charges for each plan. Get to know all the charges, covert and overt, before you sign the dotted line.
The right questions can help you get the right plan at the right price. Never buy a life insurance plan without having all the information at the tip of your hands.