Dos and Don'ts of a Life Insurance Policy You Should Know

2024-09-16

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The moment you begin earning, financial planning becomes mandatory. One of the essential parts of not just financial planning but planning for life is a life insurance policy. Though its primary purpose is to protect your family from financial stress in your absence, it has many other benefits too.

Key Takeaways

Life insurance is essential from the moment you start earning—it safeguards your family’s financial future.
Choose the right policy based on your financial needs—options include term plans, endowment policies, ULIPS, and more.
Do thorough research and don’t rely solely on agents—consult trusted people and verify insurer credibility.
Fill out the proposal form carefully—provide accurate details and avoid leaving blanks to prevent claim rejections later.
Review your policy regularly and consider flexible plans like iSelect Smart360 that let you increase coverage during life milestones.

What does a life insurance policy do?

A life insurance policy offers financial protection to your family in the event of your death. This could be in the form of a lump sum or a monthly payment. It could also offer financial support in the form of health expenses coverage, wealth creation, collateral for loans, tax benefits, etc. depending on the policy terms. There are different types of life insurance policies which offer different sets of benefits. The various types of life insurance policies include term insurance, endowment policies, Whole life insurance, money-back policies, and ULIPs.

Dos and Don’ts of life insurance policy

Do identify the core purpose

The best life insurance policy for you will be one which caters to your and your family’s specific needs. If you are confused about how to select a life insurance policy, begin by drawing up a list of financial needs, and tick them off against each policy’s specific benefits. For example, if you are the only breadwinner of your family, a term plan would help on two counts- lower premium rates, and a higher Sum Assured upon death.

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Do your research

Be open to all kinds of information.

Don’t just listen to agents, although they are technically qualified to select the best life insurance policy for you.
Talk to your friends and relatives who have taken policies; they understand your family situation better and will have a unique perspective on how to select a life insurance policy for you.
Read up on your own too, keep track of developments in the market. Be informed about income tax implications of different kinds of policies.
Select a credible insurer with a claim settlement ratio above 95%.

Don’t be hasty

Even after you choose what seems like the best life insurance policy, your research doesn’t stop there.

Keep a track of the insurance provider and its performance in the recent past.
Find out the process of policy acquisition, premium payment, claims, receipt of benefit, etc.
Find out which premium payment frequency suits you- monthly, half-yearly, yearly, etc.
Find out if they have an ECS (Electronic Clearing Service) facility to make payments safer and easier.

Do fill the proposal form carefully

A proposal form is a form that you fill while applying for a policy. It is used by the insurer to assess your risks. It is an integral part of the insurance contract.

Remember that all information furnished in the proposal form has to be completely true. You are responsible for all of it.
This information should not be disputed during a claim in the future, or else you could lose the benefits you had signed up for.
Ensure that you think about whom to nominate and fill in their details correctly. Choose someone who would be most adept at handling your family’s finances.

Did You Know?

Some life insurance policies offer wealth creation, tax benefits, and even loan collateral, beyond just financial security for your family.

Source: Money Life

Don’t leave any column blank

Fill the entire proposal form only after understanding every single column.
Don’t have anyone else fill it for you.
Don’t hide facts.
Don’t mention facts without being sure of them.

Do keep a copy

Do keep a copy of the completed proposal form signed by you.
Keep a copy of any other document signed by you as well, for your records.

Don’t respond to frauds and hoaxes

Do not provide your policy or personal details to any person claiming to be your insurer on the phone.
Check with your insurer personally about such communication.
Do not share personal details with anyone before confirming that they are authorised personnel by checking their id.

Last but not the least, you should review your policy at regular intervals. This means considering the possibility of increasing your life cover at important points in life. To avail this benefit, you need to opt for a policy like the Canara HSBC iSelect Smart360 Term Plan. It offers you the option to increase cover during marriage, childbirth, and purchase of a house. You can also flexibly choose for an increasing or a decreasing term. It also offers a plethora of benefit options like spouse coverage, multiple premium payment options and several payout options. It even offers an option of return of premium benefit in the event that you outlive the policy term. Keeping in mind all the dos and don’ts listed above, you can opt for the iSelect Smart360 Term Plan to financially secure your family.

Glossary

Life Insurance: A contract that provides a financial payout to beneficiaries after the policyholder’s death.
Term Plan: A life insurance policy that offers high coverage at low premiums for a specific time period.
Sum Assured: The guaranteed amount your nominee receives in case of your death during the policy term.
Premium: The amount paid to keep a life insurance policy active—can be monthly, yearly, etc.
Proposal Form: A form submitted when applying for life insurance, used by insurers to assess risk before issuing a policy.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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