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Owning your life insurance policy is a challenging endeavor. It’s an expensive purchase. Make sure you have a fundamental understanding of life insurance as a first step.
Different life insurance policies provide other benefits. Insurance firms give add-ons to standard life insurance contracts to accommodate their customers’ various needs. Riders are add-ons to the basic guidelines. The riders cover critical illnesses such as heart attacks, accidental death, and income benefits on disability.
The essential next step is determining which life insurance product best meets your needs. The first five things to think about are:
Determine how much your annual premiums will be after assessing your life insurance needs. Check to see if you can pay dividends for the entire policy term before purchasing a life insurance policy. A savings-cumulative-protection plan would not make sense if your insurance needs were more significant. A term insurance policy will suit you because it is less expensive, and you can afford the premium. The primary goal of insurance should be to provide protection. You could enroll in a savings-cumulative-protection plan if you regularly pay high premiums.
Use your insurance broker to explain the specifics of your plans to you. Exclusions, or situations your insurance policy does not cover, are significant. Knowing them beforehand will prevent being taken off guard when purchasing insurance coverage.
You should know the additional terms and conditions of a life insurance policy. Check, for example, the grace period provided in the event of late premium payments. Find out if there is a waiting period. Consider the policy’s other terms, such as the nomination, the loan option, the surrender charges, and the surrender value.
The person or entity receiving the proceeds of your life insurance policy is the beneficiary. Avoid naming a minor child (children may not be able to receive funds) or your estate as a beneficiary (it could have tax implications). If the policy is intended to benefit your company, you should have a formal plan for how the proceeds will be used. Speak with your independent broker about your best options for selecting a beneficiary.
Another essential consideration many overlook when purchasing life insurance is the claim settlement process. When the family’s breadwinner dies unexpectedly, their family members experience emotional and financial turmoil. A quick and straightforward claim settlement process will help reduce the family’s financial stress. There have been cases where family members abandon insurance claims due to the lengthy claim settlement process. Such a policy is useless because it does not serve the purpose of having a life insurance policy to protect your family.
Apart from the claim settlement process, it would help if you also considered the insurance company’s claim settlement ratio. It will provide an overview of the total number of claims successfully resolved compared to the total number of shares the insurer has received. A consistently good claim settlement ratio indicates that the company is doing its job of paying death claims to nominees.
Bottomline
Which life insurance plan is ideal for you and your family will depend on these five considerations. Make sure you consider all of these factors because overlooking even one can be led to a less-than-ideal decision. A financial advisor can help you navigate your decision-making process if you need assistance with any area, such as the policy tenure or the riders to choose.
