Purchasing a life insurance plan is easy. In fact, all it takes is a few minutes to buy life insurance online. But before you go ahead with your purchase, it is important to consider a few key things. This way, you can not only ensure that you make an informed purchase decision but can also ascertain that the plan fits your needs and requirements. And so, here are 5 very important factors that you should keep in mind when you set out to buy life insurance.
1. The different types of life insurance
When it comes to life insurance products, the choices are many and varied. You have term insurance, whole life insurance, endowment plans, and Unit-Linked Insurance Plans (ULIPs), among others. While the primary goal of all life insurance products is the same, they vary in terms of features.
For instance, term insurance is a pure insurance product, where you only get death benefits and no maturity benefits, unless you opt for a plan with return of premium option. A ULIP, on the other hand, also offers you market-linked returns in addition to a life cover. So, before you go ahead with your decision to buy life insurance, make sure to take the different types of life covers into account.
2. The amount of coverage
Once you’ve decided the type of life insurance you wish to buy, the next thing that you should think of is the amount of insurance coverage that you need. The premium amount is generated based on the life cover amount that you opt for. You may also want to ensure that you buy enough life cover to secure the financial effects of an unexpected or untimely death.
Therefore, choosing the right amount of coverage is something that’s crucial to ensure that there is adequate protection of your family.
If you’re finding it difficult to determine the amount of coverage that you would need for your insurance plan, you can always use a life insurance calculator to get more clarity on the right amount of coverage for your needs and your family’s.
3. The tenure of the life insurance policy
The tenure of the insurance plan is another major factor that you should consider when you buy life insurance. Generally, the higher the tenure, the better, since you would be protected for a longer period of time.
That said, most life insurance plans have a maximum age limit cut-off, beyond which you won’t be allowed to purchase them. Depending on the plan, the maximum age limit can be anywhere from 70 to 75 years of age.
However, if you wish to opt for the maximum amount of tenure, then a whole life insurance plan is the way to go. In terms of tenure, it is one of the preferred life insurance policy that you can get. Whole life plans offer life insurance coverage till you reach the age of 99.
4. The riders
Riders are basically optional add-ons that you can choose at the time of purchase of a life insurance plan. These add-ons help extend the coverage of the insurance plan by providing additional benefits. That said, riders come at a price. For every rider that you choose, you would have to pay a nominal additional premium over and above the base insurance premium.
Depending on the type of life insurance policy you choose, the riders may vary. Some of the most commonly available riders are critical illness rider, family income benefit rider, waiver of premium rider, accidental death benefit rider, and permanent total or partial disability benefit rider, among others.
When you buy life insurance online, make sure to read the rider document carefully to understand the terms and conditions before opting for it. Also, remember to choose only the riders that satisfy your needs and requirements.
5. The insurance company’s credentials
Finally, the last key factor that you should consider is the insurance service provider’s credentials such as their claims settlement ratio and solvency ratio, among others. Going through these credentials can give you deep insights into the insurance provider.
For instance, the claims settlement ratio tells you the percentage of claims settled by the company. The higher the ratio, the better since it would mean that the company settles the majority of the claims received by it.
And the solvency ratio gives you an idea of the company’s financial strength to settle its obligations on time. As with the claims settlement ratio, the higher the solvency ratio, the better since it would indicate that the insurance company is financially strong enough to take care of its liabilities.
Considering the fact that a life insurance policy is an important financial tool that allows you to secure the financial future of your loved ones, it is crucial to factor in all the above points before you consider going ahead with your purchase decision. This way, you can make sure that you’ve made the suitable purchase decision.