Life insurance can provide financial protection to the policyholder’s dependants in case of an unfortunate event. Therefore, it is essential for every person to buy life insurance. However, it can be difficult for first-time insurance buyers to select the right plan.
In this article, we will explain a few things that first-time life insurance buyers should keep in mind before purchasing a policy.
In order to protect their family from financial difficulties, many people purchase life insurance. Life insurance provides financial security in case of an unfortunate event.
For example, if the policyholder passes away during the tenure of the plan, then his/her dependants can receive a sum assured from the insurer. This sum assured can be used to meet regular and future expenses. Hence, purchasing a life insurance plan is important.
Furthermore, buying life insurance has become easier as it can now be done online. However, first-time life insurance buyers might find it difficult to select the right policy.
Here are some things that they should keep in mind-
- Assess Financial Status
Before purchasing life insurance, people should assess their financial status. This is because the policyholders will have to pay premiums regularly. Thus, they should calculate their earnings and expenses before deciding which policy to buy. Furthermore, it is important to assess the assets and liabilities to make a better decision. Furthermore, as the life stage changes, insurance requirements might change. For instance, the financial requirements of a person will be different when he/she has receives his/her first job, gets married, or is retiring. Therefore, it is also essential to consider the life stage before purchasing a plan.
- Opt for a Longer Term
Apart from the death benefit, a life insurance plan can also provide maturity benefit. Therefore, by staying invested for a longer term, a person can earn higher returns.
For instance, if a person invests Rs. 1 Lakh every year for 5 years in a life insurance plan, then he/she can earn Rs. 6,33,593 at 8% interest rate. However, if he/she stays invested for 5 more years, then the corpus can grow to Rs. 15,64,549. Hence, it is recommended to stay invested for a longer tenure.
- Assess the Amount of Coverage Required
The coverage required will depend on the financial needs of the person’s family. While calculating the cover amount, an individual must consider debt that needs to be repaid and future financial expenses. The cover amount should be sufficient to ensure the financial security of the dependants.
- Compare Plans
There are various policies, and selecting the right one is crucial. Thus, it is important to compare different plans before purchasing a policy. People should compare policies based on the benefits offered and other specifications. Furthermore, another important factor that needs to be considered is the premium.
- Insurance Company’s Reputation
There are many insurance companies. However, it is recommended to select a reputable insurance provider. People should check if the insurance company has an easy claim process.
Keep the aforementioned points in mind before purchasing life insurance.