Dos and Don’ts to remember when buying a life insurance policy

Why do we buy a life insurance cover?

Simple and straightforward, to financially secure our loved one after we die. Speaking on a more casual note, life insurance is an income replacement strategy.

How do we define a good life insurance policy?

A life insurance will be termed as satisfying, if it provides: a decent financial support at the minimal cost to our loved ones, in a situation when the person insured suffers an ill-timed end of his/her life.

Once defined, how do we next find a beneficial insurance cover?

Finding the most appropriate insurance policy for you can sometimes be a complex task. Therefore, let us explore some rules one should apply, when purchasing an insurance coverage. While we all take care of the dos, majority of us hardly invest our time in finding out the don'ts that go with the insurance policy. Let us here enlighten you with certain very significant dos and don'ts that we should put into use, when purchasing an insurance policy.

Do's:

Introspect your need:

Examining your requirement for an insurance policy and evaluating the same in numbers, is an essential thing to do. Here, you need to consider about the number of dependents in your family. Next, you need to check upon if you are the only financial support of your family. Finally, consider all the urgent and necessary expenses that your family will have to bear after you that may include your funeral costs, and any due/unpaid medical bills.

 Keep reviewing your policy on a frequent basis:

Not reviewing your policy will be like: losing big amounts in superfluous payments of premium, or failing to update the lists of beneficiaries, or continuing with an insurance solution that no longer matches your needs, or simply lapsing out on a policy provision. Committing these mistakes might prove to turn out expensive. Therefore, try avoiding them with a simple analysis, on a continual basis.

 Keep your family informed of what should be done for filing a claim of the policy:

This is just a common sense to do, which we most often tend to avoid considering the same as an abrupt subject matter. However, choosing to inform your loved ones, you are simply displaying your prudence to communicate to your loved ones that you prepared a safety net for them even after you die.

Don'ts:

Don't blindly believe your insurance agent:

Do not rely on whatever your agent has to say. Before doing so, ensure twice that they are experienced well-enough to be trusted upon their opinions and perceptions.

Don't go impulsively with other's recommendations:

Life Insurance cannot be compared to one-size-fits-all solution. Finalizing upon a life cover will require certain calculations, in order to confirm on what is right and essential for you, pertaining to your needs and situations.

Don't forget to ask a lot of questions:

These questions may involve:

Knowing about accidental cover on your policy, or how the policy will be affected in case you wish to pursue a life-threatening hobby. Asking more questions, will clear more of your doubts. This will be a sign of a matured investor, and will display your reflection towards life.

Don't buy a policy unless sure on whether you can afford it:

At the same time, never opt for monthly payment option of premium, if you can actually help with it. Paying premiums yearly can help you save a lot.

Finally, with a robust framework in mind, you are sure to look for the best policies suiting your needs. Always remember to raise questions whenever possible, and go for making customizations and alterations in the policy that others may not even be aware about.

Conclusion:

Life insurance is for long-term. Therefore, pay special attention when making a policy purchase, as well as all-through its life in order to keep a notice on the financial stability rating of the concerned insurance company. To take the right life insurance, critical illness insurance, health insurance, and other investments, preparing a fundamentally strong, fool proof financial plan is required.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in