For most people, buying a life insurance policy is overwhelming. The factors affecting the term, pricing, and benefits, and also the cover of the policy, are perhaps the most confusing. There’s no wonder, often people either end up buying a policy that is inapt for their needs or is too costly to fit into their budget.
And with the growing number of policies on offer, it gets even tougher to recognize the befitting plan. Therefore, there is an urgent need to compare the policies that not only provide the safety net for the family of the policyholder but also secures their financial future.
If you’re planning to buy an insurance policy, then this article is meant for you. Starting with the importance of comparing available policies, we’ve listed down the things that you should consider when buying a life insurance policy.
So, without any further ado, let’s dive right in.
Why should you compare life insurance policies?
As is true with any other purchase, life insurance policies also need extensive research and study, before making the payment. The plethora of insurance companies that offer different benefits asks for different premium payments. Thus, it becomes all the more important to compare the plans. Ty Stewart from Simple Life Insure (https://simplelifeinsure.com/) explains that the first things an insurer will look at when determining your premium are your age, your gender, and whether you use tobacco. However, every insurer considers these factors differently.
Since buying a life insurance policy is a critical financial decision, you simply cannot skip comparing the policies.
At the same time, when you are comparing the plans, there are a few thumb rules that you can follow to find the best fitting policy for your family.
Things that you can’t ignore…
Needless to say, the comparison needs to be firm and explanatory enough to let you decide what suits your needs the best. Comparisons can be daunting, even for someone who has had a policy before. This owes to the amendments in the legal framework and policies that surround the insurance companies and the benefits they offer through covers.
Nevertheless, you can still use some steps to make sure that you have a clear idea of the benefits you receive and that too within your budget.
1. The term of the policy
Every commodity which is ever traded comes with a lifespan, a limitation that marks the terminal to its purpose. Life insurance policies also come with a lifespan. However, they come with the option to choose for the term for which the policy is valid and operational. So, the first thing that you must decide is the term for which you wish to buy the policy. There are primarily two types of policies- term plan and a lifetime plan.
As the names are self suggestive, the term plans offer coverage for a limited time, known as the term, which may range between 10 to 30 years, depending upon your needs. On the other hand, a lifetime plan usually lasts for up to the age of 80 or 90 years, and in some cases, even beyond (the whole lifetime of the policyholder).
2. Insurance value you need
The next thing on your mind should be the cost of purchasing the insurance plan and the value that you receive in return. Thankfully, there’s an easy way to keep track of every dime you spend. And it is- DIME!
Surprisingly, these letters symbolize a smart way of evaluating the cover that you need and can afford from your plan. Debt, Income, Mortality, and Education is what DIME refers to. The first thing to consider is the debt you owe, followed by income replacement that your dependants may have after you. Both of these factors can help you decide the affordability for you. The next things that you can evaluate are your burial wishes (if any) and also the education of your dependents when you are not around. All of these factors can simplify the budgeting for you, thus ensuring that you don’t end up with holes in your pocket.
3. Benefits offered by the policy
Some policies offer savings benefits and investment returns as well. Term policies that last for about 20 years, in particular, are sought primarily for investment purposes. So, when you’re deciding which policy to buy, consider the benefits offered by the policy.
Depending upon the type of policy, you may opt from a range of benefits including retirement plans, saving returns, and gratuity returns. Notably, these features can affect the premium you pay for availing the policy cover. Apart from this, most of the insurance policies that are available in the market also offer tax benefits. So, you can also include it in your checklist when shopping for befitting insurance cover for your family.
4. Who’ll be the beneficiary?
Lastly, as the policyholder, you also need to decide who you wish to nominate as the beneficiary of your insurance policy. Essentially, after you’ve passed away, it is the beneficiary who’d receive the cover amount.
Now, depending upon who you nominate as your beneficiary, the premium you pay and the principle you receive will vary. For instance, if you nominate your children as the beneficiary, the premium and the principle will likely increase. The reason being, your children may not find work to earn any self-supporting income. On the other hand, if you nominate your spouse as the beneficiary, your premium and principle would most likely be lower. Similarly, you can also nominate a community business or a charitable institute as beneficiary, in which case, your money will benefit a social cause. In a nutshell, the beneficiary has very little to do with the premium, but a lot more to do with the aftermath of when you pass away. So, you need to consider who you can nominate as a beneficiary when buying your insurance policy.
By now you know what you need to do for choosing the best life insurance policy that matches your needs. So, start comparing the plans and shop only the ones that suit your needs.