Only you know your current situation and only you can decide on which life insurance solution is right for you. You could consult a life insurance agent or a certified financial planner to take informed decisions.
Here are some guidelines you should keep in mind while deciding on a life insurance plan:
Identify your financial goals: The insurance plan you buy should be based on your financial goals at your current stage of your life. Keep your financial goals clear, specific, measurable and attainable. For instance " I want to have a comfortable retirement " is not a specific and measured goal. " I want to send my son to a good school "
is not a concrete or quantified objective. A specific goal could be "I want to send my son/daughter to an international business school which has a fee structure of Rs 25 lakh and I need to plan for it ". Another specific goal can be " When I die, my family should receive Rs 1 Crore as a lump sum to pay for all expenses"
or " When I retire, there should at least Rs 50 lakhs in my bank account and I should have a regular monthly income of Rs 10000 " .
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Understand your current financial & personal situation - Age, income, expenses and dependents: You must have a clear picture of your life stage including the number of years required to achieve your financial goals, your income and expenses. Your insurance plan should cover all risks and give you an affordable premium which will have to be paid along with your routine expenses.
Calculate the amount of life cover that you need: This would depend on the liabilities you have, the number of dependents, current and future income, and other factors. Your life cover should be at least 10 times your yearly income. Similarly, you should save at least 30% of your income to secure your retirement.
For maximum protection & savings always choose the longest possible term: The power of compounding and concepts of time value of money ensure that your money always grows significantly over time. This makes it obvious that you should protect your loved ones and save for the future keeping as long a time frame as possible. Also keep in mind that, the longer is the term, the lower will be your premiums.
Understand all charges & features of the life insurance solution: Always take time to understand the charges attached to your life insurance plan. A good life insurance provider will always give you all the details regarding the benefits and cost structure of the plan. You should also check the tax benefits available under the insurance policy.
Check the claims settlement ratio of the life insurance company: Claim settlement ratio is an indication of the claims settled as compared to the number of claims received by the insurer. A company with high claims settlement would be favorable, simply because if something were to happen to you, your family members would get the insured amount quickly. The claim settlement ratio is also a reflection of smooth and efficient processes that are set up to ensure that the nominee gets all formalities and documentation done in a quick and efficient way.
Be informed about all servicing options offered by the life insurance company: This is necessary to understand the full range of services being offered by the insurance company. In today's day and age, you can get complete control of your policy at your fingertips by getting your Online User Account.
