Thursday, 11 July 2024

6 Factors to Consider When Choosing a Life Insurance Policy

Having a good life insurance policy is every responsible breadwinner’s responsibility so that their dependents are always shielded from unfortunate events in life. When you are planning to buy a life insurance policy, there are certain factors that you must consider before deciding the best life insurance policy for you. Here are some of the crucial factors that one must understand:

Why Do You Need a Life Insurance Policy?

● Family Protection

First and foremost, a life insurance policy serves as a safety net for your family's financial well-being. In case of unforeseen circumstances, life insurance guarantees a lump-sum payment to your family members, ensuring they have financial support when needed.
This payout provides an immediate, alternative income stream in unforeseen circumstances, allowing your family to course through a difficult time and get back on their feet. This payout, also known as Death Benefit, can be used to manage everyday costs for utilities, school fees and other routine expenditures, mitigating the financial strain of daily expenses that can bring regular life to a grinding halt. The lump-sum payout also helps family members to pursue important life goals such as education or marriage.

● Long-term guarantee and varied offerings

A well-chosen life insurance policy can be a valuable addition to one's investment portfolio. Certain life insurance options offer an investment component, allowing you to build a corpus or save for life goals, such as retirement, foreign vacation, buying a house, etc.
ULIP Plans cater to different risk appetites, helping you build a corpus tailored to your future needs. Term insurance plans safeguard your family's financial stability in unexpected circumstances. Endowment plans offer guaranteed returns alongside life protection, while moneyback plans provide regular payouts and increased liquidity. By choosing the right life insurance plan, you can enjoy peace of mind knowing you have a reliable income source, even during retirement or employment gaps.

● Tax Savings

Life insurance plans offer tax benefits, with premiums eligible for deductions under Section 80C of the Income Tax Act. Additionally, key sections such as 80D and 10(10D) offer further tax advantages. These benefits are applicable across various insurance policies, allowing policyholders to reduce their income tax burdens while ensuring financial protection for themselves and their loved ones.

Things to Keep in Mind Before Buying a Life Insurance Plan

Outlined below are some key factors to consider before buying an insurance plan:

1. Understand your need for coverage

Evaluate how much coverage your family needs by taking into account factors such as fixed expenses, financial dependents, long-term goals and retirement corpus. Additionally, assess whether there are any existing resources your family can rely on to cover expenses and debts during uncertain circumstances. By addressing these questions, you can determine the appropriate coverage amount required.

You can always seek advice from our financial experts who can inform you about different policies and assist in evaluating your insurance needs. This assessment will ensure that the life insurance you purchase provides essential financial protection for your family.

2. Select the type of insurance plan

After evaluating your needs, the next step is to select the type of life insurance policy that aligns with your requirements. There are several types of life insurance policies available, such as Term Insurance Plans, Endowment Plans, ULIPSs, Retirement Insurance Plans, Child Insurance Plans etc. Each category comes with its specific advantages and limitations, making it crucial to compare and comprehend their distinctions to select the most suitable option for your requirements.

3. Check the claim settlement ratio

The claim settlement ratio indicates how efficiently an insurance company processes claims. A higher ratio signifies better service for policyholders. Leading insurers often offer claim guarantee conditions, ensuring prompt settlements if policy requirements are met. For instance, Reliance Nippon Life Insurance Company (RNLIC) boasts an impressive claim settlement ratio of 98.8% as of March 31, 2024.

4. Examine the features of the policy

You must thoroughly examine the features and details of the policy. Look for additional features like extra payouts for disability or accidental death and critical illness. Check if the policy provides a premium waiver in case of critical illness or accidental disability.

With these riders, policyholders have the option to cease premium payments in case of critical illness, or disability. Moreover, check if the policy allows customisation of premium payment terms, frequency of payments, payouts, and more.

5. Go through the terms and conditions

Looking into the terms and conditions of a life insurance policy is crucial before making the purchase. Take note of essential aspects like the period for missed premium payments, any waiting periods, and other policy rules. Understand the nomination process, explore options for loans against the policy, and familiarize yourself with surrender fees and potential returns. Knowing these details ensures that you make an informed decision and fully comprehend the implications of your life insurance investment.

6. Your money is always safe

Your life insurance policy offers a secure haven for your funds, which is backed by stringent regulations enforced by the Insurance Regulatory and Development Authority of India (IRDAI). This regulatory body meticulously oversees insurance companies, upholding policyholders' interests and managing investments responsibly. Through monitoring investment practices and maintaining solvency ratios, IRDAI safeguards the financial well-being of policyholders. This regulatory framework ensures transparency, fairness, and the orderly operations of the life insurance industry. Therefore, investing your funds in a life insurance policy offers not only financial security but also the assurance of regulatory oversight, providing peace of mind throughout the policy tenure.

The Bottom Line

Choosing the best life insurance policy is a significant financial choice that needs careful thought. You must assess your unique needs and consult with experts to find the right policy for you and your loved ones. By taking these steps, you can make a smart decision and pick a policy that fits your requirements well.

Click on the link to check out the best insurance plans - https://www.reliancenipponlife.com/life-insurance-plans

Take the first step towards securing your family's future by reaching out to us at https://www.reliancenipponlife.com/. Our team of financial advisors is here to streamline the process of selecting the ideal life insurance policy that offers peace of mind and protection for your loved ones.

References:

* https://www.statista.com/statistics/655505/number-of-new-life-insurance-policies-india/#:~:text=In%20the%20financial%20year%202023,across%20the%20country%20that%20year

https://www.reliancenipponlife.com/about-us

https://www.kotak.com/en/stories-in-focus/insurance/7-things-to-consider-before-buying-life-insurance.html

https://www.reliancenipponlife.com/knowledge-series/protection/5-reasons-you-must-invest-in-a-term-insurance-policy

https://www.adityabirlacapital.com/abc-of-money/5-things-to-consider-when-choosing-life-insurance-policy

https://www.ageasfederal.com/blog/5-things-consider-purchasing-life-insurance

https://www.smcinsurance.com/life-insurance/articles/how-to-choose-the-best-life-insurance-policy

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Mktg/RNLIC/Blog_factorstogetinsurance/V1/Jun24