5 Factors to Check Before Buying Life Insurance in India

2024-08-02

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Research in the buying behaviour of Indian consumer for life insurance suggests that a large number of people invest in life insurance to save tax. Even those who do invest in insurance for financial safety, end up ignoring the very first rule of safety and end up with inadequate life cover.

If you want your life insurance policy to work for your financial protection goal, you need to steer clear of these mistakes. Consider the following five factors to build a clear understanding of what you want from your life insurance policy:

1. Your Life Cover Need

If you wish to provide your family and child adequate financial protection, you need to know how much they will need. The answer starts with the present household expenses and goes on to include the following:

Future financial goals of the family
Present household needs – monthly kitchen expenses, kid’s school fees,
Future household needs – home renovation, major repairs and modifications
Financial needs of the family – health insurance cover, life insurance for spouse
Future lifestyle and household expenses

Your life insurance need is a combination of all these demands. Thus, you should have a life cover that is large enough to provide for your family’s needs as per today’s estimates and keep up as your needs grow.

Meaning, you should have the option to increase your life cover easily. Today’s best life insurance plans give you the option to increase your life cover either at crucial life stages, or automatically at a fixed rate.

Canara HSBC Life Insurance’s iSelect+ term plan allows you to increase your life cover upon your marriage and childbirth. In case you have already passed these life-stages and still need the growing life cover, you can opt for a life cover which will grow at 5% every year.

2. Your Family’s Income Need in Your Absence

Estimating the size of life cover is only the first step. You still need four more to go, before you are equipped with all the information you need to buy the perfect life cover.

Once you have estimated the size of your ideal life insurance, your next step is to estimate your family’s income need in your absence. You should know that it is easier to manage the household with a regular monthly income. So far as you can look after that the household can run smoothly.

However, in your absence, the family will need an alternative source of income. Now, if your life insurance only offers a lump-sum pay-out, your family members will have to reinvest the proceeds to generate a safe monthly income.

The best term insurance plans now offer monthly income as a death benefit pay-out option. So, your family doesn’t have to put any effort into a regular income, provided:

You have decided the income amount and growth rate for the income
Divided the total sum assured in the plan towards income and lump-sum pay-out

Remember, regular income pay-out is for the convenience of your family. But the lump-sum pay-out also needs to be there, so that they can invest in their long-term goals and meet any immediate liabilities.

3. Insurer’s Claim Settlement Record

Almost everyone talks about the claim settlement ratio of life insurers to judge the certainty of claim settlement. However, it’s not just the claim settlement ratio that makes a difference now.

Claim settlement experience is the moment of truth for your life insurance plan. Losing the breadwinner is bad enough for your family, and if they have to struggle to receive the only financial support they will have, it almost defeats the purpose of life insurance.

That is why the best insurers have ‘claim guarantee conditions’ in place for life insurance policies. Claim guarantee ensures that if your policy meets the conditions, the claim is settled faster. For example, with a claim settlement ratio of 99.23%^, Canara HSBC Life Insurance Company promises to settle a claim within a day if your policy meets the claim guarantee conditions.

4. Additional Features of the Life Insurance Plan

Additional features help you build a stronger financial protection umbrella, which can protect your family from multiple risks. Few of these additional features include:

Accidental disability cover: Provides financial assistance in case of physical disabilities resulting from an accident
Critical Illness Cover: Provides financial assistance in case you contract a life-threatening disease and need treatment for it
Waiver of Premium Option: Physical disabilities hinder your abilities to earn money, but your family still needs the financial protection of the life cover. This, option allows you to continue the life cover after suffering a permanent disability without paying any additional premiums.
Child Support Benefit: This is an optional benefit you can add to your base life cover, to ensure additional financial support for your child

Apart from these, options like limited premium payment term and return of the premium can be useful for you.

5. Policy Exclusions

And finally, one of the most neglected sections of the policy. Knowing what your life or term insurance plan covers will is only one side of the coin. To set your expectations straight, you also need to look at what is not covered in a life insurance plan.

For example, life insurance does not cover death during adventure sports activities, including bungee jumping, skydiving, dirt racing etc. Similarly, war, terrorist attack, rioting, and even death while driving under the influence of alcohol or narcotics are also out of the umbrella range.

Thus, buy a policy that helps you not only safeguard your family’s future but also, does it conveniently. With these five factors in place, you can certainly hope to achieve this goal.

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