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5 Things to Consider When Buying an Insurance Policy

It’s important that you buy insurance as per your own needs and requirements and consider these 5 points.

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Updated:December 29, 2017, 1:30 PM IST
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5 Things to Consider When Buying an Insurance Policy
An aircraft flies over a billboard of General Insurance Corporation of India in Mumbai on October 13, 2017. (Photo: Reuters/Shailesh Andrade)
The primary purpose of everyone rushing to buy a life insurance is protection, however, there are secondary purposes to it as well, and they differ from person to person. It’s important that you buy insurance as per your own needs and requirements and consider these 5 points:

1. Purpose


Not knowing the purpose is a major mistake. Mostly all of us buy insurance mainly for protection purpose as life insurance is a backup plan for providing financial security to your dependents and covering your liabilities in your absence. However, it is great investment instrument too that yields good returns. The tax benefit is an additional benefit that an individual gets for getting a life insurance cover.

2. The Insurance Cover


When buying an insurance policy most of us go for quantity as in we choose a policy that offers the maximum amount of insurance cover consequently paying a higher insurance premium irrespective of whether or not we need that big an amount to cover us or not. When looking at insurance policies we must calculate our overall expenditure on an annual basis and then choose the insurance policy that suits our expenditure instead of blindly opting for one which has the highest amount.

3. Choose Wisely


There are different options available in the market for Life Insurance. For example, you may have to choose between a ULIP plan which is a combination of insurance and investment; Or a term insurance which protects your long-term liabilities; Or endowment plans which are low risk and low returns are offered however the maturity benefit is guaranteed.

4. Premium Term


Insurance is a contract and before entering into any contract you must read the terms and conditions thoroughly. Premium is a fundamental part of an insurance policy and this amount has to be paid by the policy taker at regular intervals, it is important that you read and check for the premium amount to be paid before buying a policy. This not only helps you in knowing whether it is feasible for you or not but also helps in the calculation of returns at its maturity.

5. The Claim Settlement Ratio


Last but not the least, you must never ignore the reputation of an Insurance provider before getting an insurance policy. The insurer’s claim settlement ratio, which is the ratio between approved claims to the aggregate claims filed is an important consideration. This ratio indicates how reliable the company is and how active it is when it comes to settling the insurance claims.

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| Edited by: Puja Menon
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