While choosing an insurance plan, usually people do their research and compare and understand various plans available, but end up choosing the plan that their friend has purchased. But it is better to remember that what is good for your friend does not mean it will suit you as well. A carefully planned insurance policy can yield you many benefits, but a misfit policy will make you feel burdened. And you might end up abandoning the policy without making any gains.
5 Things to Know Before Buying an Insurance Plan-
Here are 5 things you should know before buying an insurance plan-
- Choose the Right Plan-
It is important to know the types of insurance available in the market before buying one that is best for you.
- Term Plans-
This type of life insurance policy provides you coverage for a set period of time without merging your investments and insurance needs. You can get a high coverage at a lower premium for the time period you wish, but you will not get any returns for the amount you are investing if you survive the policy term period.
- Endowment Plans-
You can choose endowment plan if you want to get returns for the money invested by you. In this, you will get back the money you have invested. But do not keep your expectations high as it is just insurance plan and thus the returns will be nominal. In this you will have to invest more to yield high returns.
- Money Back Plans-
This is similar to endowment plans, but in this you do not have to wait till the end of the policy term to get your money back. In this the benefits are paid out on regular basis.
- Pension Plans-
This is a retirement planning technique, and usually does not offer death benefits.
- Unit Linked Insurance Plans-
This is insurance cum investment plan. This is for those who are willing to take risk and are ready to wait for a long term period. As the returns of ULIP are market linked, the returns are higher in comparison with traditional plans, but are not as guaranteed as in term plan.
- The Early You Opt For Insurance The Better-
When you are young and healthy, your life insurance premiums will be lower and thus it will be easy for you to get a high coverage at very low cost. The more you delay buying your insurance plan, the more your premium charges will increase.
For instance- When you buy the term plan at the age of 25, the premium you need to pay will be around Rs. 5, 000 to 7, 000. But when you buy your insurance plan at the age of 35, the same coverage will cost you between Rs. 15, 000 to 20, 000
- Choosing Premium –
Your coverage depends upon your premiums, thus it is wrong to choose a premium that you cannot afford just for the sake of high coverage. This will only mark a dent on your wallet and will land you in troubles. And defaulting on insurance premiums will only make the situation worse. You can choose for monthly or quarterly premiums, or invest in products when you start to get the perks.
For instance- If you get a handsome yearly bonus or some amount as gift from your parents, then you can invest directly in a one-time insurance plan.
- Outlay of Life Insurance Benefits-
In the case of unexpected incidence, your nominees are the ones to receive the payouts. You are the beneficiary for plans other than term plans, if you survive the tenure. You can choose your nominees and they can be your spouse, children, aging parents or anyone else who relies on you as beneficiary. The returns paid from insurance are tax free for the beneficiary except for in the pension plans.
- The Knowledge of Riders-
There are various insurance riders that offer protection against accidental death, critical illness, permanent disability etc. These are the additional benefits added to your basic policy at the payment of small additional premiums. But remember it is not necessary that you need all the riders. Your agent may make you feel that you need all the riders, but be careful about it. Think wisely regarding what is required and not required for you.
For instance- There is no benefit of going for an accident rider if you already have a term plan with high cover. Accidental death rider assures that there is double sum assured for your nominee if something unfortunate happened to you during an accident. But it is important to understand whether you really need it or not.
It is better to be wise while buying an insurance plan rather than just doing what your agent says or following your friends blindly. It is not necessary that the plan that suits your friend will suit you as well. Choose the premium you pay carefully.