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3 useful tips to choose the right insurance policy

Last updated on: June 26, 2014 17:34 IST

3 useful tips to choose the right insurance policy

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While selecting an insurance policy, bear in mind that premium charges don't disturb your other expenses, says Manish Shah.

Given the nature of life insurance as a topic of discussion, it is likely you would avoid it. What makes life insurance complex is when you try to find answer on what is the amount you should get insured for.

One should be very cautious while choosing a policy so that the premium does not stress your monthly expenses.

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Image: One should buy an insurance plan that suits his lifestyle.
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One size doesn’t fit all
You can choose a ‘sum assured’ or the amount your family will receive on your death such that it’s enough, when deposited in an instrument like an FD will generate returns enough to replace your current income.

In this example you will see that Rs 1.8 crore of life insurance is needed and it will cost this person (40 year old male, non-smoker and a family of 4) approximately Rs 27,000.

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Image: The premium you pay for any policy should not disturb your other expenses.
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3 useful tips to choose the right insurance policy

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Choose a policy that doesn’t disturb your lifestyle  

Ideally, you should choose an amount that will help your family maintain the current expense level so that they do not have to make significant changes to their lifestyle.

In this case, you require Rs 1.73 crore and it will cost approximately Rs 26,000.

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Image: Always select a policy that offers best value for money.
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3 useful tips to choose the right insurance policy

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Bear in mind the nitty-gritty of paying huge premiums

However, given how much prices have been going up in the past few years, you might not want to spend too much on this category.

In such a case, the least you should do is to have enough life insurance to cover your loans such that your family does not have to sell assets to pay off loans if you passed away.

In this example, only Rs. 25 lakh of life insurance is required and it will cost under Rs 7,000 per annum. 

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Image: One should always select a policy that does not put a strain on other ongoing loan payments.
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On examining a sample of our users, we found almost 10 per cent of our users had less life insurance cover than their outstanding loans. This is very risky.

It becomes all the more difficult to understand when we see that their incomes are more than sufficient to pay the premium – infact, in all these cases, the annual premium for a term insurance plan bought online is less than 5% of their net annual income.

So, even if you want to run away from discussing life insurance, do this quick check for yourself and ensure that you have, at the very least, the basic amount required to cover all your loans.

Your family will thank you for it. 

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Image: Always take an expert advice before buying any insurance policy.

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