How to Shop for a Good Life Insurance Policy in India

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Getting a good life insurance policy can be one of the best gifts for your family, in case something was to happen to you. Unfortunately Life Insurance options in India are not marketed well and are difficult to understand. While every Insurance Policy provides you with the life cover you can either choose between a policy that results in long-term savings (Endowment or Whole Life) or a term-life policy that is much more affordable. By doing some careful planning, shopping around and spending time to understand the various Life Insurance options you can take care of your family’s future needs at an affordable price.

Things You'll Need

  1. An estimate of how much money you want to leave for your family
  2. An estimate of how much money you can afford to pay on a monthly basis

Steps

1

Estimate the amount of money your family will need Develop an estimate of the amount you want to leave behind taking into consideration: your current age, number of family members who will need financial support, if married whether your spouse currently works, and educational needs if you have any children. Also factor in other routine support needs like rent, living expenses, etc (also consider increases in cost of living). Use a spreadsheet or find insurance estimation calculators on the internet that might help you to develop this. Be sure to include your spouse or other family members in this planning effort.

2

Shop for Life Insurance Policy Options Start by visiting websites of Insurance companies in India like LIC, Tata, Reliance, etc. Develop an understanding of the various types of policies and their terms and benefits. The broad types of policies are: 1. Endowment plans- which fetch a fat packet at the end of the term. 2. Endowment+Whole Life-Plan which gives you the promised amount at maturity, covers you life and pays your family after you. 3. Money back plans- where in you get around 20% of your policy amount back after every 4 or 5 years to be used when needed. 4. Children’s Plans-with the help of which you can plan for your child’s education. 5. Unit plans- wherein LIC invests in stocks ,with caution, on your behalf, at least possible risk to your money. 6. Term Assurance- Last but not the least ‘Term Assurance Plan’ that pays your family,a large amount, in an eventuality for the least amount you pay as premium.

3

Identify the type of policy you want to buy and estimate payments Other things to keep in mind before finalizing on a policy type are: 1. Any tax advantages that a certain policy might provide you 2. Any bonus offerings on top of the policy amount 3. Cancellation penalties and the waiting period to recover any money Once you have identified the type of policy estimate your monthly payments using the insurance websites to finally settle on the insurance policy that is best suited for you. Also talk to any friends or colleagues or an accountant for recommendations.

4

Contact an Insurance Company or Agent It is strongly recommended to start with Life Insurance Corporation of India (LIC) as they are 100% backed by the govt. and is the most reliable option. When talking to an agent negotiate for discounts or ask the agent if he is willing to make a few payments on your behalf. Insurance agents get a hefty commission for the 1st year of an endowment or whole life policy and several of them are willing to make 1 or 2 monthly payments on your behalf. Others might offer a gift or some other type of incentive. Contact agents from more than 1 company and negotiate hard and be willing to wait.

5

Finalizing the Policy and Signing the Paperwork Make sure you read all the paperwork and fine-print and ask for explanations when unclear. Ask the agent to give you all promises for incentives or cash-back in writing. Once the policy is signed make a copy and store the original in a safe place. Congratulations! You have now taken the most important step for securing your family’s future.

Tips

  • If you are high net-worth individual make sure you talk to your accountant as well to understand the tax implications of various types of policies.
  • Ask your agent to send your reminders when your policy payments are due.
  • Ask your agent to keep a copy of your policy in case you lose yours.
  • For young families whose cost of living might increase as the family grows, the Term-Life option is least expensive and provides the maximum life benefit.
  • Certain types of policies allow you to borrow a loan against the policy.

Caution

  • Be sure that you can afford the monthly payments. Most policies will not refund any money within the first 2-5 years in case you default on payments.
  • Fill out your application carefully and accurately. Your insurance company can cancel your application if they determine that you have provided them incorrect information.
  • Agents sometimes are over enthusiastic in selling a policy and give you exaggerated figures of returns. Ascertain the exact figure from any branch office or another agent known to you, before finalizing.

Comments

Dislike about your article

do you pay part of your salary back to company
if yes? how much?

Paying Premium of clients is not under the code of conduct in LIC.
don't teach wrong practise to people from your website.
Dont use "When talking to an agent negotiate for discounts or ask the agent if he is willing to make a few payments on your behalf. Insurance agents get a hefty commission for the 1st year of an endowment or whole life policy and several of them are willing to make 1 or 2 monthly payments on your behalf." its his hard work efforts.
you take home Hefty Bonus do you repay your Clients the bonus.

Shame on you for teaching wrong things.

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