Life insurance is a contract between a consumer and insurance company that offers some kind of protection to the insured, at a cost. Under the agreement, the insurer agrees to pay a certain amount to the beneficiary in case of the demise of the policy holder. To obtain such protective coverage, the buyer pays a premium to the insurance provider. Depending on the type of contractual agreement, other benefits for events like a critical illness may also be covered.
Life insurance is a long-term contract spanning several years (even decades at times), making it all the more important for you to carefully evaluate your current situation and future needs before buying a policy.
Consider the various options available and understand the rules to maximize benefits under life insurance. Here are some tips that can help you make a better decision when availing a life insurance policy.
Do’s while availing life insurance
- Research – There are several kinds of life insurance plans that are offered by insurers and it is important that you carefully consider your options. Today, consumers can also rely on online sites to compare different policies.This can help you save huge amounts, while receiving the maximum benefits. It is also important for you to check the reputation of the insurer to avoid any unpleasant surprises in the future.
- Read – Most people avoid reading the terms and conditions at the time of purchasing life insurance cover. This is a big mistake that can have disastrous consequences in tough situations where you may actually need to claim the benefits. Read the fine print thoroughly to ensure you completely understand the caveats before you make a decision.
- Free lock-in period – Most insurers provide a free lock-in period (often 15 days) during which the policy can be returned. Individuals must take advantage of this period to completely understand the terms and conditions, and return the policy, if found inappropriate. The entire premium is refunded after making certain pro-rata adjustments.
- Payment options – Insurance companies allow monthly, quarterly, half-yearly, and annual premium payment options. It is important to choose a time period that you can safely meet, in order to avoid delays that can result in loss of coverage or penalties. Opting for Electronic Cheque System (ECS) facility can ensure you do not miss payment dates.
The premium amount depends on several factors and varies from one person to another. A smoker will have to pay more to avail the same coverage in comparison to a person who is not a smoker. Health status can also significantly affect the premium.
In addition to all of these considerations, there are certain common mistakes that you should make it a point to avoid.
Don’ts while availing life insurance
- Buying insurance for tax savings – The primary aim of availing life coverage is for protection. Although tax benefits u/s 80C of the Income Tax are available, individuals should avoid buying life insurance simply to save their tax liabilities.
- Information disclosure – It is vital to remember that concealing any information can result in loss of benefits under life plans. In addition, premiums may be forfeited. For this reason, it is absolutely essential to disclose all relevant information at the outset.
- For singles or children – Life insurance is availed to take care of dependents and single persons or children below 16 years, who have no dependents. This is why they may do without such coverage.
If you exercise caution and follow these simple tips you can be sure to make the right choice. If you still have doubts, do not rush into an agreement; instead, seek advice from a financial adviser or from experts online.
About HDFC Life:
HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.