Everything You Need to Know Before Getting a Life Insurance Policy in India
Introduction to Life Insurance
Life insurance is a crucial financial planning tool that ensures a fixed sum of money is paid to the assured (the policyholder) in the event they survive the term of the insurance policy, or to a nominated beneficiary upon their demise. This policy is designed to secure the financial well-being of the assured's family, preventing them from financial ruin following the policyholder's death and ensuring they maintain their standard of living.
Types of Life Insurance in India
Life insurance in India is generally purchased in two forms: Term Insurance and Endowment Insurance.
Term Insurance solely focuses on providing financial protection to the beneficiaries without any return on investment. Endowment Insurance provides both protection and an investment. It includes a provision for the policyholder to receive a lump sum or a regular payment at the end of the policy term, usually 20-25 years.
Considering Adequacy of Sum Assured
Before purchasing a life insurance policy, it is vital to ensure that the sum assured is sufficient to cover long-term financial needs. The sum assured should be adequate to provide a steady income from the investment of the insurance money. An assured should consider the future expenses and ensure that the sum assured is sufficient to cover these for at least 20-25 years.
Investment Aspects of Life Insurance
Investment instruments such as stocks and mutual funds in both equity and debt securities should be evaluated to ensure that the policyholder can protect future expenses through yield optimization. Insurance companies often provide investment options within the policies, which can be used to generate additional income.
Evaluating Claim Settlement Ratio
One of the most critical factors to consider when purchasing a life insurance policy is the claim settlement ratio of the insurance company. A good life insurance company should process claims without any issues, ensuring that the policyholder's beneficiaries receive the compensation they are entitled to.
Vetting the Life Insurance Company
Before finalizing a life insurance policy, it's important to research and evaluate the financial stability and claim settlement process of the insurance company. A company with a high claim settlement ratio and a good reputation is more likely to provide reliable and prompt services to their policyholders and beneficiaries.
Conclusion
Purchasing life insurance in India is a wise financial decision, especially in the light of the potential financial risks and uncertainties that may arise post-policyholder's death. By considering the sum assured, the adequacy of coverage, and vetting the insurance company's claim process, one can ensure that their life insurance policy offers the best level of protection for their family and financial future.