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6 Steps To Take When You Are Shopping For Insurance

  • Highlights

  • Understand the coverage you seek

  • Look into the various types of insurance policies

  • Compare the coverage you seek with your income

  • Compare the lenders’ credentials & claim settlement procedures

Simply put, insurance is the support system that helps you minimise financial loss or stop your net worth from diminishing in value, should a catastrophe strike. Think of it as the shock absorber in your car that tackles unexpected bumps so that you don’t have to bear the impact. So, it is needless to say that shopping for insurance is something that you should give your complete attention. Here are some simple tips that you should follow.

Determine how much coverage you need

The purpose of buying insurance is to provide for your dependents financially in case you meet with an untimely death. So, before you evaluate an insurance policy, determine how much you spend on monthly expenses as a family, the number of members dependent on you, their ages, prices of essential commodities and services. You will also need to take into account medical emergencies and pre-existing conditions, as well as inflation. As a thumb rule, it is wise to take into assume that the prices of essential commodities and health treatments will appreciate by 20% each year. Using this information, calculate the coverage you and your family will need in another 5, 10, 15 or 20 years.

Evaluate various types of insurance policies

While most health insurance policies are similar, it is always best to familiarise yourself with the various types, especially when it comes to life insurance. Understand terms such as term insurance, whole life insurance, endowment policy, and so on. A basic understanding of the different types will help you choose the right insurance for you and your family.

Typically, the most common insurance policies are term insurance, unit linked insurance plan (ULIP), endowment policy, and money-back policy. Term life insurance gives you risk protection for a pre-determined period, usually several years, while ULIPs combine the benefits of insurance along with investments in mutual or debt funds. On the other hand, in an endowment plan, the cover that you are entitled to is given only on maturity of the policy or on death of the policy holder, whichever is earlier. A money-back policy, as the name suggests, is where the money is paid back to you periodically, as survival benefits.

Take into consideration your current and projected income

Once you have a fair idea of how much protection you and your family will need, the next step is to find out if you are capable of paying the requisite premium. Remember, the higher coverage you seek, the more expensive the premium will be. So, view your current capacity to pay the premium as well as your projected earnings. Also note that the premium increases as you age, and if you add members to the insurance plan. Most importantly, whatever is the amount of insurance cover you choose, payment of premiums should not leave you and your family in a condition of penury. So, basis your income adjust your insurance coverage expectations.

Check the credentials of the insurer

Insurance is a significant investment, so do your due diligence before you select an insurance provider. You must check facts like how long the company has been in existence, what its reputation is like, its claim settlement ratio as well as financial stability. After all, you must be sure that 30 or 40 years down the line, the company must be in existence and capable of delivering on its promise.

Look into claim settlement procedures

There are several life and health insurance companies in India competing for your business. However, you must ensure that your insurer is invested in your interests and adheres to policy terms long after you’ve paid premiums. Opt for a company that prioritises customer service and goes the extra mile to help you in a time of distress. So, apart from the claim settlement ratio, look into how long it takes the company to process a claim, the procedures involved, etc.

Compare policy benefits as well as prices

Whether it is life or health insurance, it is important that you compare policies, evaluate the cost, as well as benefits offered by each and only then make a decision. You can either do this research online or contact various companies and seek details from a representative. In addition, look into the senior management, reviews, product details, branch network, etc. before making a decision. This, as well as a thorough cost-benefit analysis will help you make the best choice.

While you may not get an insurance policy that offers you every single benefit that you seek, following these tips will ensure that you shop for insurance in a systematic manner and choose the best option from the ones available to you.

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