Wealth Guide: Women's Day Special - Things women should know before buying Life Insurance

Wealth Guide: Women's Day Special: Life insurance always brings peace of mind. Yet, we see women in India starkly lagging when it comes to purchasing life insurance. This is evident from the Insurance Regulatory and Development Authority of India (IRDAI) annual report that found an overall 3.2% of life insurance penetration in the country and women accounting for 34% of the total first-year premium collected in FY20.

Whatever may be the case, life is uncertain and having a life insurance policy in your kitty accounts for sound family planning. That said, there are things to know as a woman before you take the plunge. Since there are so many life insurance products available in the market today, it is a smart move to conduct your individual due diligence before you make the purchase. Murli Jalan, Head, Agency & Direct Distribution, Bharti AXA Life Insurance, share knowledge on things that women should know before buying Life Insurance:-

1. Types of Life Insurance Plans:

Murli Jalan suggests, “There are several types of insurance plans that you can choose from. Ideally, it should be determined basis your requirements and what your end goal is.

Term Insurance Plan: You buy a term insurance plan for a fixed period, usually in blocks of 10, 20 or 30 years. A term life insurance does not carry any cash value. Therefore, you do not have any maturity benefits either. This makes term life insurance policies more affordable in comparison to other types of life insurance plans. Moreover, term plan premiums tend to be comparably lower for women as they tend to live longer and the age setback also offers a cost advantage to women.

Endowment Policy: With an endowment policy, you have the added advantage of the policyholder receiving a lump sum of money if the insured survives beyond the maturity of the plan. That’s the only difference between a term life insurance and an endowment policy.

Unit Linked Insurance Plan: If you are looking to build your wealth and finance your life goals, then a unit-linked insurance plan is the way to go. The premium paid towards the plan partly goes towards the life insurance cover and the rest is invested in market-linked products. You can partially withdraw funds post the lock-in period is over.

Money Back Policy: Very similar to an endowment plan, the Money Back Policy too offers several survival benefits which are proportionately allotted over the tenure of the policy term.

Whole Life Policy: The Whole Life Policy is the most expensive type of life insurance available as it extends up to the entire life of the policyholder. You also receive survival benefits with the policy and have the option to partially withdraw funds, if need be. Some types of whole life policies allow the insured to use it as a guarantee to avail of a loan.

Annuity/ Pension Plan: The premium that you pay is accumulated in the form of assets by the insurance company. It is subsequently distributed to the insured in the form of an income by way of an annuity. It can also be remitted as a lump sum as per the terms and conditions of the policy.”

2. Calculate Your Cover:

Jalan advised, “You cannot simply guess the life cover that will be sufficient to secure your loved ones. As a matter of fact, it is the product of a simple calculation of your annual earnings along with considering key factors like existing financial obligations, funding for major life goals, and inflation that will help you arrive at a justifiable figure.”

3. Premium Frequency:

“While your life insurance plan is active, you should be able to keep paying the premiums according to your schedule of payments as outlined in your policy document. Check with your insurance company on the frequency of your premium payment as that also varies depending on the policy and service provider. Keep in mind your financial situation and what you can afford to pay for this,” he added.

4. Underwriting Leniency:

“When you buy a life insurance policy, you must choose an insurance provider that considers your specific health or personal activities in a fair manner. Not doing so can create disputes in the future when claims are raised and there are chances of them being rejected,” he suggested.

5. Life Insurance Riders:

“With insurance policies, you cannot follow a ‘one size fits all’ formula. To meet individual investor requirements, you can add what is known as ‘life insurance riders’ which are basically extra benefits that you get by paying the same or adding to your existing premium. Common life insurance riders include critical illness cover, death, and income benefits and so on,” he opined.

6. Getting A Loan Against Your Life Insurance Policy:

“You may think that all types of life insurance policies are acceptable to financial institutions as collateral against which you can get a loan. Term and unit-linked life insurance policies are not acceptable as collateral for any loan. Only whole life insurance policies, endowment and money-back plans can act as collaterals for loan sanction,” he said.

7. Claim Settlement:

“Selecting an insurance company that has a healthy claim settlement ratio ensures that you and your loved ones will get your pay out when a claim has been raised. IRDAI’s official website will give access to authentic data regarding this. You can also ask your family and friends about their personal experiences if they have been doing business with your chosen insurance provider,” he added.

The Last Word

“Before you purchase your life insurance plan, make sure that you adequately research your options to make a well-informed decision. Your personal circumstances should ideally determine the length of your life insurance policy. Your aim should be to get a policy that offers maximum benefits and allows you to save. Having said that, any form of life cover is better than nothing,” he concluded.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)