Do's and Don'ts: While Buying Life Insurance
Written on Tuesday, September 29, 2015
By Anil Chopra- Group CEO & Director, Bajaj Capital Ltd.
A life insurance policy
is basically an agreement between an insurance company and a life insured, in which the insurance company agrees to pay a certain amount of money called benefits either on the death of the life insured or after a set of period in exchange of premiums paid by the policy holder. Despite knowing the need of life insurance, people always find it difficult to choose the right plan. This is one of those areas of personal finance that people most misunderstand. Generally, a life insurance policy is bought based on the needs and the saving potential of the policyholder. Life Insurance plan
is taken to protect your loved ones by giving them financial freedom and therefore you should be extra careful while buying it. Please keep in mind these do's and don'ts while going for life insurance-
-Do seek advice from experts, receive pieces of advice from different sources, mull over each of them patiently. Based on that, do think over on your need for life insurance. Quantify it in numbers if you can. If you have a family of four, how much will they need to support themselves without you? If you are the primary bread-earner in the family, what minimal amount of coverage will be enough for your surviving family to pay off school fees, college fees and meeting other expenses. Cover all your debts and outgoings, liabilities and loans, even outstanding amount of credit cards.
-Do realize its significance as life insurance is meant to protect your family financially and it should not be treated as only tax saving instruments.
-Do inform your family and specially your spouse/nominee, about policy and what they should do to file a claim in the event of any uncertainty. While we all avoid controversial subjects of that nature, you are just displaying common sense when you choose to inform your loved ones about safety nets that you have put in place to protect them even when you're gone.
-Review your policy on a regular basis and modify it, if the needs and circumstances change. For example, if, you get married, blessed with a baby, liabilities or loan increases or you change your occupation etc. You can also take a help of your financial advisor while renewing your policy.
-Don't buy policy with lesser cover just to make it cheaper. If the premium is unaffordable, buy it with a shorter term instead.
-Don't leave any column blank in the proposal form and also don't let someone else fill your form.
-Never miss or delay your premium payment as the policy doesn't cover during the lapse period.
-Do not conceal or misstate any facts as this could lead to disputes.