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:
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:
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.
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:
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.
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 99.01%, Canara HSBC Life Insurance Company promises to settle a claim within a day if your policy meets the claim guarantee conditions.
Additional features help you build a stronger financial protection umbrella, which can protect your family from multiple risks. Few of these additional features include:
Apart from these, options like limited premium payment term and return of the premium can be useful for you.
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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