Insure Life

9 Essential Factors to Choose Life Insurance

Life insurance is supposed to protect your loves ones if something happens to you. But insurance companies aggressively wrap that protection in a variety of investment products, such as endowment plans, children's plans, pension plans and unit-linked insurance plans (ULIPs). These give you terrible returns, after all the costs and charges. If you are buying life insurance on your own, keep these 9 things in mind.
Term
Buy Only Online Term

There is one kind of insurance you need and that is term plan. The right term plans provide protection for 5-40 years (or higher) and a large sum assured can be purchased for a relatively small premium. Online term plans are much cheaper than the offline ones. Stay away from insurance-cum-investment products because they will offer very low returns. In parallel, you should plan your investments in such a manner that at the time of retirement, you don't need a life insurance product.
Premium
What You See?

When you compare premiums of online and offline versions of same (or different) insurance companies, the quoted price must be enticing. Online plans are cheaper but you will know the true cost only after you undergo medical tests. Premiums change depending on your health condition. Be prepared for a 10-20% hike in online term plan premium depending on medical test reports. If there is major ailment then there can be even higher loading of up to 200%. For any loading, if you do not accept the insurer's offer and want to cancel the policy within free-look period, the insurer will deduct the medical test cost and stamp duty. And in case you don't cancel, you end up paying higher premium than you initially anticipated. Offline term plans can also have loading depending on health conditions. So, stick with online term plans.
Cover
Expected Cover

You can expect to get cover for 10-20 times your annual income. While it's true that your salary, age and insurers' policies dictate the amount of insurance cover you get, many insurers force you to settle for lower insurance cover depending on your medical condition. Insurance companies should be considering these parameters before the medical tests, but they may not. Companies do this to reduce their risk by reducing the sum assured and retaining high premiums. If you are a non-smoker and the plan offers same premium for smoker versus non-smoker, then choose a product, which has lower premium for non-smokers. Conversely, if you are a smoker and the product offers same premium for non-smoker and smoker, then it is a good option for you.
Policy Term
Long Policy Term

The ideal age to buy term plan is when you have dependents, that is, usually after marriage. Choose a term plan that may cover you till your retirement. An insurance policy that offers you a term of less than 30 years and covers you for less than 70 years of age is disadvantageous.����¯�¿�½������ While you may not need cover beyond 70 years of life some products are available till age 75 to 80 years and policy duration of up to 40 years. Products offering policy term of 75 years (maximum age) minus entry age is also an advantage for those buying term plan at younger age of say 25 years.
Settlement
Settlement Record

Take a look at claim settlement record, rejection and pending ratios of the insurance company you are planning to choose. Avoid those with low settlement and high rejection ratio.Insurers in top-3 claims settlement ratio, low rejection and pending ratio can be given a preference. It is better to judge the claim rejection ratio with respect to benefit amount rather than only on the number of claims rejected. Some insurers may have low number of claims rejected, but claims rejection (benefit amount) can be higher. It means they are paying low value claims and rejecting more number of higher benefit amount claim, which tells that the insurer is scrutinizing the higher value claims more.
History
History of the Insurer

A company that has been around for a longer time should be considered over new entrants in the field. Insurance is a complex business and it takes years of handling claims before any meaningful track record is established. Buying from new firms do not mean easier claims processing. In fact, they are going to scrutinize claims as much as old insurers as they are aware that fraudster may try to target new insurer to see if they can get the claim passed. New insurers will have a higher ratio of early death claims (within three years of policy purchase) due to lower base, and hence claims rejection ratio. This may look bad even though it does not indicate they are doing anything wrong.
Riders
Decide on Riders

Most online term plans don't offer riders and neither do you need it. Cover for accidental death and accidental disability is important. You can get it from a Personal Accident (PA) cover from health insurers, which is more comprehensive than life insurance riders for the same. Critical illness (CI) rider is also not required as you can get more comprehensive CI cover from health insurers. Buy online term plan without consideration of its riders. Some plans make it difficult to discontinue riders and hence it is better to just buy life cover from term plans.
Tests
Medical Tests

Medical tests cannot certify all the details about you and are never foolproof. The belief that medical test will ensure death claim payment does not hold good since there are additional disclosures you need to make apart from taking the medical tests. You should be truthful while making declarations since insurance business is based on the principle of utmost good faith. You should declare your existing insurance policies since insurers do not like a person to be over-insured which usually happens in fraud cases.
Speed
Instant Cover

Since most online plans often require medical tests prior to insuring you, it may not be possible to get instant cover. Almost all online term insurance needs medical test depending on age and the insurance cover. Insurers change their parameters for medical tests and may allow young and healthy to buy without medical tests. Online products do not give you the support of an intermediary, but online term is still a better bet.
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