Life Insurance is one thing, which people should pay most heed to if they care about their family. When you have a family (spouse and kids), you need to make sure that their future is financially secure if God forbid, you are not around to provide for them anymore. And in such a scenario, saving dimes is not an ideal solution. Finding a cheap life insurance can save you money right now, but in the long run, when your loved ones will actually be in need of some financial stability, a cheap insurance scheme will turn out to be a disaster of a financial decision.
It is typical human behavior that we tend to prefer the cheapest product available. While there is nothing wrong with saving a few bucks while choosing a life insurance plan, the question we need to address is if that is the only deciding factor? Should the price of a life insurance policy be the only criterion we need to keep in mind?
The short answer is NO! Let us discuss, why
Unlike any other financial product, purchasing a life insurance policy affects our entire life and therefore, there are a few things that need to be kept in mind before buying a suitable plan. Here are a few ways that will help you in making an informed decision.
Review all your insurance needs and understand your requirements. Plan for your future and your family's. Once you have reviewed all your requirements, it is time to decide whether you need a term life insurance plan or a whole life insurance plan. Term plan offers cover for a specific period of time, whereas a whole life plan provides cover for the entire life.
Check up on your debt and mortgages and decide the amount of coverage that you would require to cover all that debt.
Decide the amount of premium you'll be able to pay regularly without affecting your current standard of living.
Contemplate on the factor of how many dependents you have and how much financial support will they need once you are not with them. In case something unfortunate happens, then how much money would be required for your children's education, your parents' comfort and your spouse's well-being.
While purchasing a life insurance policy, take riders like accidental death benefit, critical illness care, return of premium etc. These riders can cost a little, but the benefits provided by them are definitely worth the extra cost.
While comparing life insurance policies, if you come across two different policies providing the same cover at different premium rates, check the duration that they cover. For example, a term life policy charging Rs 6000 annually for a cover of 25 lacs and is valid for a period of 50 years is better than a policy that is charging you Rs 4000 annually for the same amount of cover but is valid only for next 20 years.
The purpose of life insurance is to help your loved ones in their time of need. Therefore, buy a product that fulfils their requirement and is not just offering a better price. You can use the above mentioned factors as basic guidelines for choosing the right policy, but the final decision has to be taken by you only and therefore your family's need should guide the purchase.