How to discover the Best Insurance policy for you & your loved ones?Wealth Prime
Life Insurance: An Introduction
Life Insurance is defined as an agreement between the applicant and an insurance company, where the latter offers a guarantee that in case of the borrower’s death or after the end of the policy term, it shall pay the insured sum. This category of investment is quite beneficial as it offers safety to the individual’s family even after he/she is gone.
Currently, there are 24 life insurance companies in India, with each offering multiple product line-ups as per your needs — based on term plans, endowment plans, ULIPs, and others. The premium rates depends on your age, monthly/annual income, medical history, insured amount, and several other factors.
Below is the list of the 24 life insurance companies in India:
Each of the above organizations offers really good plans, created and developed as per the needs and requirements of the applicant. But how to pick the best insurance policy? What comparisons you must seek? Let’s discuss the factors in detail.
When you seek to apply for a life insurance policy, there are three terms that you must be aware of:
Major aspects of a life insurance policy
Premium: The premium is a set amount of money that you need to pay so as to be eligible for the required covered sum. You can define the premium to be an initial investment that gurantees you better returns in the future.
Death Benefit or Sum Assured: The assured sum is the cash that the insurance company will pay to the nominee or beneficiary of the policyholder after his/her death. This amount is decided after considering multiple factors and varies from company to company.
Term: The term is the specific period for which your policy is effective. This duration depends on the type of policy you choose.
Understanding the end goals
Life insurance policies offer many benefits. But you should know for which end purpose you want the money for:
Long-term peace from stress:
Thinking about what the future holds for us can add considerable stress to your life, which is already burdened with the tensions of personal and professional issues. If you have an insurance plan, you can concentrate on the other aspects without having to worry about your long-term future.
Financial security for your family:
Obviously, most of us work so that our families are secured. If your primary goal is to ensure the financial stability of your family members even after your demise, this is the perfect option.
Savings and tax benefits:
Life insurance means that you shall get a return on your investment after its term is over. Some policies offer returns based on the market conditions while others give bonuses on maturity. Additionally, a life insurance plan guarantees tax savings. The Income Tax Act has options to give rebates on premiums paid. Even the amount that is given after death does not come with tax payments.
You can seek additional benefits from a life insurance plan, such as a pension which ensures that you do not have to worry about cash after retirement. Certain life insurance companies also give the facility of taking loans.
Knowledge about the types of life insurance policies
With so many life insurance companies in India, it might become overwhelming when you decide which type of life insurance policy you should purchase. Most of these firms offer a myriad of plans such as term life plans, whole life plans, endowment plans, money back plans, ULIPs, and others. You should choose one as per your coverage needs, financial goals, and premium paying ability.
Term insurance policy is the most simple and affordable life insurance policies available. It offers only a certain sum after your death.
Whole life policy:
These policies covers: the applicant’s entire lifetime. After the payment of a level premium, they come with multiple benefits and added cash value. It is a good option when you want to secure your future in the long term.
If you wish to have protection along with savings, you can go for endowment plans which offer a risk cover and a savings option.
Group life insurance plans:
As the name implies, group insurance plans offer insurance to several members of your family under a single plan. These contracts are best for organizations or affinity groups.
These plans guarantee regular payouts to the policyholder through survival benefits. These come in addition to the life cover and related benefits. If you are looking for liquidity and have targets in life, this is a good option.
Unit Linked Insurance Plans or ULIPs:
ULIPs not only offer a risk cover after the death of the policyholder but they also offer alternatives to the applicant to invest in certain funds.
Pension plans or Annuity plans and Retirement plans:
These policies guarantee financial security to policyholders after retirement, by giving regular annuity payments.
Other important factors to consider
Claim settlement ratio (CSR):
CSR is defined as the ratio of the number of claims settled by the company to the number of claims received by the insurer in a certain year. This specifies the percentage of claims paid by the organization annually. It is always recommended to choose an insurance company with a high CSR.
Grievances solved ratio (GSR):
GSR is the ratio of the number of grievances solved by an insurance company to the number of grievances received by the organization in a certain year. Since it highlights the efficiency of the company, you should again go for an organization with a high GSR.
Sometimes, companies go bankrupt, resulting in leaving customers’ lives jeopardy. Therefore, check the solvency ratio and if it is below 1.50, you should better avoid such an insurer.
To summarize, when you choose a policy from the life insurance companies in India, think about the number of dependants, the number of funds required, your income and premium payment ability, and existing liabilities. Go for companies that have higher Claim Settlement Ratio and those which provide additional benefits. Follow the above tips and arrive at the most suitable option for you and your family.