Steps to Take Before Purchasing a Life Insurance Plan

Life insurance is a financial product that provides your family with monetary protection in your absence. However, choosing an adequate life insurance policy is crucial to ensure your family’s financial security. With various life insurance options available, buying the right plan that meets your requirements can be overwhelming. Here is a guide on the important aspects you must evaluate before purchasing a life insurance policy.

Checklist for Buying a Life Insurance Policy
The main steps you need to follow include:

1. Understand Your Family’s Financial Needs Thoroughly
The first step is to analyse your family’s current financial position, future goals, outstanding liabilities, and dependents and calculate the total corpus they would need to maintain their current lifestyle in your absence. Make a list of all major expenses, such as children’s higher education and marriage, healthcare costs, home loans, other debts, monthly household expenses, etc. Evaluating short and long-term financial needs will help determine the amount and type of life insurance your family will require in the future. Explore a highly flexible and customised term insurance plan with ACKO India.

2. Calculate the Right Coverage Amount
Once the financial needs analysis is done, use online insurance calculators provided by insurance providers to determine the ideal coverage amount suitable for your unique situation. Input accurate details, including current age, gender, lifestyle habits, preferred policy term, pre-existing medical conditions, and income. The insurance calculator provides suitable life coverage options and premium details that best suit your needs.

3. Assess Your Health and Lifestyle
Life insurers consider health history and lifestyle habits as key risk factors before providing coverage to applicants. To ensure faster claim processing later, disclose pre-existing medical conditions accurately at the time of the proposal. Also, evaluate family medical history, especially hereditary conditions. Providing this information upfront helps insurers assess mortality risk correctly.

4. Learn the Difference Between Term Insurance and Whole Life Insurance
While term insurance plans provide pure life cover for the family during the predefined policy tenure, whole life insurance plans offer life protection along with savings over the long term. Term insurance is a cost-effective way to get maximum coverage, with low premium rates due to zero investment benefits. On the other hand, whole life insurance costs more due to the investment component. Based on priorities around family protection, choose a suitable policy type that best suits your needs.

5. Evaluate Optional Riders Offering Additional Benefits
Riders serve as attachments to basic life insurance plans, providing additional specialised benefits at marginal extra premium costs. Some useful riders include a critical illness rider to cover expenses around common critical diseases, a disability cover rider for loss of income in case of disability, an accidental death benefit rider, a waiver of premium rider that waives future premiums in case of permanent disability, and so on. Evaluating riders along with the main policy coverage ensures comprehensive protection.

6. Analyse Existing Insurance Covers Held By You
Before finalising a new policy, analysing your current insurance positions allows you to avoid duplicate coverage, resulting in unwanted additional expenses. Scrutinise group insurance covers running under your employment, analyse pension schemes and gratuity benefits applicable in the event of untimely death, and see if any bank-linked policies are active in your name. Such reviews prevent over-insurance and enable optimised use of the insurance budget.

7. Research Premium Rates and Features of Top Insurance Providers
Once the policy type, riders, coverage amount, and tenure length are chosen based on the family’s insurance priorities, the next step is to gather online quotes from leading national and private-sector insurance companies. Compare premium rates across insurers, claim settlement ratios, customer service responsiveness, financial strength of the insurance carrier, and policy features before finalising the right insurer.

8. Read Policy Wordings Carefully to Avoid Claim Denial Scenarios
Every life insurance contract comes with specific terms and conditions, such as a suicide clause, a grace period for premium payments, exclusions for non-disclosed pre-existing illnesses, claim denial scenarios, etc., where insurers refuse claim benefit pay-outs later on. Read policy documents carefully to avoid unpleasant surprises. Getting professional legal help ensures you make informed choices.

9. Set a Realistic Annual Insurance Budget
Evaluate your savings capacity and deduct all existing financial liabilities before finalising a new policy’s annual insurance premium budget. Avoid overcommitting your income, which makes it difficult to continue policy payments in the future, especially during contingencies or job losses.
Be realistic about the amount of premium you can afford annually throughout the policy term to ensure uninterrupted coverage.

The Bottom Line
Identifying the right life insurance plan that balances adequacy of coverage with affordability requires careful evaluation on multiple parameters, as discussed above. Follow this step-by-step guide, assess proposals across providers, and make informed decisions to secure your family’s financial future even in your absence with optimal insurance solutions.