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How to choose right insurance policy ?

Updated on June 5, 2015

How to chose the right insurance policy ?

Since we live in uncertainty, it is becoming very much essential to have an insured life for our family. Choosing the right insurance policy ensures our future and future of our family. Somany insurance products are available and it becomes complicated and more confusing in choosing the right insurance policy.

While choosing insurance policy first we have to see whether that fits to the current and future financial condition or not. Currently how much premium one can afford and in future also how much premium can be afforded. This is very important. Because if one buys an insurance product which does not fit pocket then financial condition may worsen.

Before buying insurance product, clear your mind on the following questions:

Do you need an insurance policy ?

What you want the insurance to cover ?

How much you want as pay back ?

For whom you are buying the insurance ?

Can you bear the premiums ?

Does the insurance product gives you, what you want ?

Do you want tax benefit ?

Cost Benefit Ratio

The cost of the insurance products varies as it depends on what it covers. So one has to decide what he needs to cover. Carefully the cost and the benefits have to be rightly balanced. For example if one has health problem which is not serious or one spends too much occasionally on health issues then he has to assure whether the insurance product covers it or not. Here in this case life insurance will not help a lot but mediclaim policy will surely help a lot just to recover the medical cost.

Different Types of insurances

Term Insurance

This type of insurances covers for a limited period of time. But if one passes away after few days of the maturity of the insurance, there will be no payback. But if you have short time i.e. after some particular time period if you need money then term policy can be chosen. Another situation is that if you have kids, you will need money to pay their college fee, you will need funds and term policy will benefit you. If you have limited budget then also you can opt for this type of insurance products.

Endowment policy

This insurance is one of the popular insurances. In this type of insurances a lump sum is paid after a particular time period or on death, whichever is earlier. So this scheme provides one type of investment opportunity.

ULIP

Unit linked Insurance policy ( ULIP ) provide insurance for life, where the policy value changes with time according the value of the underlying value at that time.

Money-back policy

In endowment policy money is paid back only after the term is over. But money back policy assures periodic payament to the policy holder.

Tax Benefit

Some people want to get tax benefit. So ensure whether the product covers tax benefit or not.

So while choosing the policy one have to correctly plan how much his dependant will need after his death. As the value of meney changes with time, it is wisely advisable to get a policy which retursn at least ten times the current salary.

The premium will depend on the type of insurance product and what it covers. So just ensure whether the premiums can be paid on time or not. If the premiums are not paid timely then some penalty is imposed or in some cases the policy gets lapsed, in which the policy holder gets nothing in return, instead he loses some money. If right insurance is chosen then this problem can be avoided.

Once the insurance policy has been bought don't forget to keep all the documents related to the insurance in a safe place. Never mistake considering any document as not useful. Keep all the premium receiptsalso.

Suggestions to chose the right insurance policy

One can search over the internet regarding different types of insurances. Somany blogs, websites and forums are available where one can get idea on insurances.

  1. Don't be in hurry while choosing a policy. So many insurance products are available. Get all the quotations. Compare all the products. Check whether the product meets your requirement or not. Decide which insurance is closer to your requirement. If you want tax benefit, then check whether the insurance covers tax benefit or not.
  2. It is better to to engage with the agents and firms which do not disclose the minute details. Better opt for a good agent who can explain in details about the insurance which you are buying and why you are buying it.
  3. Don't make a mistake in buying the wrong insurance in a hurry. Take your own time and have better understanding on the product. Buy the product only when you feel you are satisfied with the product or if you feel that the insurance product will give you the maximum benefit.
  4. Be careful about the premiums. Buy the insurance which you can afford.
  5. While opting for an insurance think about the whole family members. Chose an insurance which will benefit all the family members not only the adults.

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