5 factors to consider while choosing life insurance policy

Accident and illness happens in life. Having insurance policy for your life and health is one of the best ways to make sure that you and your family members are secured for future financial risk.

If you want to build a financial portfolio for secured future then insurance policy is a must to include in it. However, the key issue is getting the right insurance policy based on your requirements.

In this article we have explained 5 key factors to help you in choosing the right insurance policy.

Features of the Insurance Policy

If you are going for health insurance policy then you need to first look into the diseases that your plan covers. Some of the health insurance policies cover existing diseases after 4 years and some others after 3 years.

If you want any specific diseases to cover in your health insurance policy then make sure that it’s included in it. Do not go by your insurance adviser’s assurance.

5 factors to consider while choosing insurance planIn life insurance you cover your life. As a standard thumb rule used by many financial experts, your life coverage amount should be 10 times of your annual income to cover your family in case of your death.

In India, insurance is a protection cum saving tool. If you want to build a corpus for your children’s education or marriage and along with that you want to have life coverage then look for a insurance policy which gives you good return and covers your life to an extent.

You need to put more attention to the policy terms, premium paying terms and tenure, maturity date and charges if any to understand the features better.

Cost of Life Insurance policy

After choosing the right policy, you need to figure out; whether you can afford the cost for the risk that you have covered.

If it’s out of your budget then we suggest you to do a cost-benefit analysis before going for it.

Like, if you have taken a life insurance policy for a bigger amount then consider taking it for a lesser amount to match your cost. One crucial step to be taken is to compare the products on the basis of cost and benefits.

Fund performance

5 factors to consider while choosing insurance planAfter selecting the policy you need to do a background check of your insurance company to understand its customer support, policy structure, online payment facility and network.

If you want to invest in a ULIP based plan then be careful before investing in it. To understand the fund structure in ULIP you need to look into the past performance of company and its stable return.

Settlement ratio of Your Insurance Company

You should keep this factor in top priority list before selecting your insurance company. Generally we use to keep investing for a long term and at the end we are required to submit documents and do the necessary paper work to settle our claim.

At this point, insurance company use to check all the details that are provided and matches the claim requirement. For this reason, you have to look for a company which has high claim settlement ratio to avoid any problem in later part of your life.

You should also make sure that you provide all the correct documents and do the paper work while applying for an insurance policy.

Hearsay Rule

Many times people invest into wrong insurance policies due to the fact that they go by hearsay. It’s not necessary that the policy your relative or neighbors or friends have taken will also be appropriate for you.

We all differ in terms of our requirement and health needs. The ideal way would be to choose your life insurance policy based on your financial and health needs.

We suggest you to list down your own requirements and try to match it with the life insurance policy offered in market. After a thorough analysis, take the one that suits your requirements most. Good Luck!

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.