Imagine a 34-year-old man. He has a ₹40 lakh home loan. He has a wife and a two-year-old child. Moreover, it is the last week of March. The tax deadline is close. He buys a life insurance policy. The sum assured is ₹25 lakh. The premium is paid by the man. The papers go into a drawer. He feels protected.
But what if he is no more?Will the payout clear his loan? Will his family get the assured amount?
Buying a life insurance policy in a rush is common. But rushing is risky. There are five factors to think through before buying life insurance. They will clearly tell you what you end up with.
1. Work out how much cover your family needs
Try to get the answer to this question before buying a life insurance policy: If your salary stops tomorrow, which bills will still knock on the door?
Add any debts or loans. Include a year’s worth of household expenses. Add school and college fees as well. Think about any promises you have made, like a sister’s wedding. Now subtract your savings, investments, and any existing life insurance.
What is left for you?
That is the gap your new policy must cover.
Many people skip this step. They pick a number like ₹50 lakh. This amount can vanish fast. It is not enough when you have a ₹40 lakh loan and a young child. Inflation also matters.
Use the human life value method. It uses your age, income, and liabilities to give you a number. Use HLV calculator, It does the calculations and puts the real numbers in front of you.
2. Pick the type of plan and the right term
Term insurance promises to pay you the sum assured if you die during the policy term. With a pure term insurance policy that does not include a return-of-premium benefit, no maturity benefit is generally payable if you survive the policy term, subject to the policy’s terms and conditions. So, treat it as protection, not an investment. That is why the premium is usually lower
If your main goal is protection, term insurance is the way to get large cover. If you want a savings element, ask the insurer what proportion of the payout is guaranteed, or how much depends on bonuses. Please be aware that Bonuses are not guaranteed. So don’t expect an illustration to be a guarantee.
The term matters as much as the plan type. Your cover should last until your children stand on their own. It should also last until your loans are paid off.
In Life insurance, always check critical illness cover and accidental death cover. Ask how much each one costs. Ask yourself if you’d actually use it. Sometimes they add value. Sometimes they don’t justify the price.
Premium deductions are allowed under the old tax regime. Maturity proceeds are tax-free only if the policy meets conditions. Moreover, tax rules in India keep changing. Be sure to check the rules before you decide.
3. Choose a premium you can pay for decades
When premiums stop, a policy lapse. Then your family has no coverage at all. Choose a premium that seems affordable even in a lean month. The premium for a term insurance policy is normally fixed at the time of purchase. So buying at 30 is cheaper than buying at 40. Buying life insurance at a younger age may help you secure a lower premium, subject to your health, lifestyle, underwriting assessment, and the policy terms.
You should also clearly compare quotes on terms for the same sum assured and policy term. Also check the payment frequency (quarterly or half-yearly). Ask whether paying yearly is cheaper than paying monthly.
4. Check the insurer’s claim record
The claim settlement ratio clearly shows the share of claims paid in a year by an insurance company. You should always analyse the public data of the life insurance policy and the company to avoid future troubles. You can easily find this data in IRDAI’s reports. Compare the claims, the total paid, and the share rejected.
Then ask how long claims take to settle. Some companies settle in weeks, some in months. Review the insurer’s published claims data, complaint information, and available service disclosures to assess its claims-handling record..
Always check that the insurer is registered with IRDAI or not. This is a major requirement. Always talk with a friend or family member who has made a claim with the insurer. Transparently ask them about the insured amount and the promises they got. It can tell you more than any blog or policy expert.
5. Read and Ask Clearly Before Signing a Life Insurance Policy
Many rejected claims are avoidable. They happen because of inaccurate information. Be honest about your health. Always think about your salary and how many years you will be working before signing a life insurance policy. Moreover, you should disclose everything accurately before moving on with the policy.
Read the exclusions before signing. Many policies do not pay for suicide in the first year. Coverage, exclusions, and claim conditions vary by policy. Disclose your medical history accurately and review the policy wording to understand the circumstances in which benefits may or may not be payable.
Always name a nominee. Informyournominee about the policy clearly. Families often find out about a policy years later, and that is why it becomes more difficult to get a claim. Keep the policy number and the insurer’s contact details. Keep them in a place where your family can find them easily in the future.
Conclusion
Finally, use the free look period. Eligible life insurance policyholders generally have a 30-day free-look period from receipt of the policy document to review its terms and request cancellation if dissatisfied, subject to applicable regulations and conditions. Refunds may be subject to permitted deductions.
