Planning To Buy the Best Life Insurance Policy in India? 5 Things to Keep in Mind

Life is unpredictable and you never know what situation you may find yourself in. While you cannot plan for everything, having financial security does help you tide over unexpected times. It also gives you stability and peace of mind as it enables you to plan for large expenses like a house, a vehicle, or education.

Insurance is a kind of investment that helps you secure your future. It helps not only you but also your family by setting aside some amount for their future well-being. Before you start looking for the best life insurance policy in India, there are some things that you should know about a life insurance policy. Let’s look at the five main things that you should keep in mind.

Best Life Insurance Policy in India

1. Inform your family

You have the best life insurance policy in India and are sure that your family’s future is secured but do they know about it? Always ensure that your family members know about the policy. A good idea would be to keep the policy document in a place where everyone can access it.

Since the policy is aimed at securing your family’s future, ensure that you walk them through the policy. Tell them about the policy number, insurance amount, and what kind of policy you have taken. A great tip would be to note all the important details somewhere where your family can easily look up the details. You could make a note in a digital diary or create a document on your home computer. This helps your family in claiming the money that is due to them without any hassles.

2. Look for high sum assured

While there is no number that can give you the actual value of human life, you do need an estimation of the amount of money you want to leave for your family. Always make sure that you opt for higher life insurance as that ensures that your family is well taken care of when you are gone. Even if you have the best life insurance policy in India, you have to see if it is accurately calculating your human life value.

There is a simple way to judge the amount of insurance. Typically, we would look at how much the person is earning and when they plan to retire. For instance, if Mr. X, aged 30, earns Rs 10 lakh per annum and plans to retire at 60, then the sum that he should aim at is Rs. 3 crores (10 lakh multiplied by 30). This is a simplified way of looking at this, you would also need to account for inflation and any hike in your salary to arrive at the value.

Taking insurance that assures you a sum at the higher end helps your family maintain their current standard of living. This is why it is very important to take a hard look at the assured sum of the life insurance policy.

3. Do your research before buying

This is very important as all policy sellers will tell you that they are the best life insurance policy in India. However, before you buy the life insurance policy, you need to do your research and ensure that it aligns with your financial goals.

Since your family’s future is at stake here, make sure you know the policy thoroughly. There are a few things that you need to look out for in particular. These include the human life value, why you want to insure, the type of life insurance policy, affordability, and the ease of policy servicing. In addition to these, also look at the claim ratio and how the linked funds are performing.

4. Know your needs before you invest

While all agents will claim they have the best insurance policy, does it align with what you want? This is the first thing you need to know. People take out insurance for a variety of reasons- safeguard their family’s future, education expenses, retirement planning.

After you identify why you need a life insurance policy, you can look for the best one for your needs. There is a range of life insurance policies that cater to different needs, and it can be easy to get lost in the information if you don’t know what you are looking for. Look at different online resources like life insurance explained to get a better idea of its finer points.

5. Make regular payments

Once you decide on the policy, ensure that you make regular payments. Simply having the best life insurance policy is not enough to secure your family’s future, you will need to actively invest in it.

Ensure that you keep on track with the payments and avoid a lapse of your policy at all costs. Remember that you are investing in your future and ensuring that your family is taken care of when you are gone.

The Premiums You Pay Actually Save Your Money – Know-How!

As a contract between the insurance company and the insured, these life insurance plans contain a valid consideration to be enforceable by law. Paying off premiums forms the base of the contract, which makes it complete.

The decision to choose a policy is often influenced by the premium rates and the affordability of the plan. However, we ought to not sacrifice the policy coverage to save on insurance premium payments.

Bringing that compromise would defeat the purpose of the insurance plan, which is to secure financial security for our loved ones when we are gone. Financial risk management requires the use of life insurance.

how premiums lead to better returns in long run

Regardless, two people of the same age living in different locations will be offered a different level of coverage or a different premium if they have different medical conditions and income-earning capacities.

It is advantageous to purchase a life insurance policy at a young age, such as 28 or 30. Life insurance plans that are purchased at a young age are cost-effective. The more you age, the more responsibilities you face, and, at that stage, a life insurance policy becomes a necessity and, due to the increased age, the premium increases.

Do life insurance premiums come in different types? How often do you have to make premium payments? What are the rules concerning tax benefits for life insurance premiums paid in your name or the name of specified family members? You should know these basic rules.

Discounts Offered On Life Insurance Premiums

Many insurance companies offer discounts on premium rates depending upon the sum assured and the modes of premium payment. This is precisely what the term rebates means.

1. Rebate for periodicity of premium

Insurance policies usually require periodic premium payments, and depending on one’s cash flow, annual, semiannual, quarterly, or monthly payment schedules can be chosen. If the company collects premiums more frequently, the costs of handling them (collection, processing, and administrative expenses) tend to increase.

The company has access to the funds longer (for investment) if the premium is paid at once for the entire year as opposed to monthly. The company can use those funds for investing and offer you cheaper rates.

2. Rebate for online payment

In general, the company’s servicing cost for online premium payments is lower than for physical payments. Also, the company saves money by not paying agents’ commissions when physical policies are sold.

Accordingly, various companies may already have given a rebate before quoting the rates for online premium payments. The premium rates quoted should already include the rebate, else the rebates offered will be higher than those offered with a physical payment.

3. Extra Premium

The normal premium tables apply to people whose lives have no additional risk, which is known as ‘standard lives’ in the insurance industry. Ordinary premium rates apply to people with standard lives. Occasionally, the insurer may charge extra premiums for people with health issues such as diabetes or heart disease or who work in hazardous occupations.

Additionally, insurance covers are also charged extra if they are purchased alongside the base policy (known as ‘Add Ons’ in insurance jargon).

4. Level premium

The term level premium describes insurance policies in which the premium remains the same throughout the contract. In this case, the premium level is guaranteed and the company cannot change it at a later date.

In most cases, life insurance plans, except for life insurance plans that pay level premiums, this is advantageous to the life assured and the insurance company. The term level premium describes insurance policies in which the premium remains the same throughout the contract.

Here, the company is guaranteed to keep premium levels and cannot change them at a later date. Both the life assured and the insurance company benefit from the level premium payment process, and thus most life insurance plans, except for some term insurance plans, are level premium payment plans.

5. Increasing and decreasing premium

Term plans with increasing premiums (as explained above) are typical examples. An increasing premium applies to mortgage redemption policies in which the premium drops as the policy holder’s outstanding loan balance decreases.

6. Single premium

Single premium policies are typically only available to people with higher incomes or who have idle funds.

7. Non-payment and late payment

A “grace period” is usually outlined in most policy contracts, which allows the policyholder an extension to pay the premium after the due date. The policy will continue to be in effect during this period if he pays the premiums without incurring any additional fees.

Best Life Insurance Policy in India

If your life insurance policy is for something other than term insurance, the grace period for monthly payments is generally 15 days, and for other frequencies of payments (quarterly, half-yearly, yearly) it will be one month but not less than 30 days. Term insurance policies usually have a grace period of 15 days.

8. Tax Benefits on Premiums

Tax-deductible life insurance premiums paid by the policyholders for themselves, their spouses, or their children may be deducted from taxable income under section 80C of the Income Tax Act. Section 80C can’t be applied to premiums paid for policies owned by other third parties (other than a spouse or children) such as parents (fathers, mothers, or both) or in-laws. These are not applicable as a new tax slab taxpayer.

Final Words

The purpose of this article is to help people understand how premiums lead to better returns in long run. Instead of being frustrated as you pay premiums or your life insurance plans, you switch your mindset into a positive one by understanding that the money paid as a premium is not wasted. It will bring countless benefits for you in the years to come.