How to Compare Life Insurance Plans?
Ruchi, wanted to be a fashion designer but when her dad passed away, being the eldest of three sisters, she was married before she could complete her graduation. She vowed the same will not happen to her children. She insisted her husband to take a life insurance in India policy. Her husband was cross as he thought Ruchi expected him to die soon. But that is untrue.
Life is uncertain for all. Taking a life cover does not mean you are expected to die. You are only planning for your loved ones in case of an eventuality. Not everyone may want to take insurance but you should, especially if you are the one earning for your family, are paying for a home loan or personal loan and have kids who need money for higher education / marriage.
A life insurance cover acts as a contingency plan. Even after you are gone, your family members (nominee) will be financially stable as they will get the sum assured of the life insurance in India policy. Depending on the choice of your plan, it acts as a saving – cum – investment vehicle too and is eligible for tax exemption as well.
In today’s age of technology everything is just a click away. Even your insurance. You can compare, buy and renew your insurance policies online. All you need is a computer, a sound internet connection, an online payment account like a credit card or debit card or any other mode that will enable you to make adequate payment and fair bit of knowledge on various policy options. An online life insurance in India policy is as good as any other policy.
Now that Ruchi had convinced her husband to take the plunge, he was now faced with another big question, which policy to take and how to determine which insurance cover will provide maximum benefits with low premium?
In India, Life Insurance Corporation of India (LIC) is the largest PSU that provides life insurance covers. After the year 2000, there are several private life insurance companies too that provide life insurance in India policies. The various types of life insurance plans are:
Term Plan – This is a basic plan to cover the risk of death of the insured over a specific period only. In case the insured survives the policy term, then there is no payout and the entire premium is retained by the insurance company.
Whole life insurance plan – Here the insured’s life risk is covered for his or her entire life span. Whenever the insured dies, the insurer is liable to pay the sum assured. The premiums are high and could be payable for as long as the insured is alive to keep the risk covered.
Endowment Plan – It is an insurance cum investment plan. In case the insured dies during the policy term, the beneficiaries or nominees get the sum assured of life cover. But if the insured survives the policy term, the investment and a percentage over it is returned, as returns on the investment, to the insured at the time of maturity.
Money Back Plan – In this plan, the insured gets a periodic payment soon after the initial premium is paid. In case the insured survives, the entire payment made till now is returned along with additional premium. However, if the insured dies, the beneficiaries receive the full sum assured without any deductions.
One must first choose the type of plan that fulfils their requirements and then compare life insurance plans based on the list of exclusions, list of coverages and premium. Standard exclusions are death by accident, suicides and terminal illnesses. Coverages may include accidental death, monthly income to beneficiaries or pre payment of sum assured if the insured is diagnosed with terminal illness.
Term Plans are most suited for all. They have a low premium and cover the basic risk on life. However, low premium does not certify it to be the best policy. It is important to note that death due to accident is a standard exclusion in all term plans unless otherwise mentioned or included in the policy upon payment of marginal premium along with life insurance premium.
Other benefits may include a monthly income of a particular amount or an amount paid at an increasing rate. This income is paid for a specific number of years to your beneficiaries, long after you are gone. This too may be included in the policy after payment of extra premium.
Endowment plans, money back policies and whole life insurance in India too come at a higher cost to the insured. The premium is based on the risk covered, term of policy, age of insured, additional coverages (if any), whether the person is suffering with the any major illness or is the person an addict to tobacco etc.
Higher the risk to the insurance company, higher will be the premium charged
Remember, when you are buying an insurance plan you are actually buying peace of mind for yourself. Make an insurance plan your best friend who would look after your family when you are not there for them. After all a friend in need is a friend indeed.
Source: https://www.creditsudhaar.com/blog/2016/01/04/how-to-compare-life-insurance-plans/
