How to choose the right life insurance policy?

How to choose the right life insurance policy.

It is most important to select the right policy to gives you the complete benefits in order to fulfil all your financial needs.

When it comes to select the right policy, either you should posses the complete knowledge about the product or some one should educate you for a clear picture so that it makes easier to come to a conclusion.

All the insurance companies strive hard to come up often with the new products to meet the clients’ need and you can find a wide range of products available in the market that even make more jumble as to what to buy?

Often thoughts will pop-up in your mind as to which insurance policy is going to cater all your needs. In fact, answer to this question lies in you and no one gives better answer other then you.

Just you need to ask few questions to yourself which I am going to discuss below in details.

Prioritize your needs.

Is this investment primarily based on one of more of the followings?

Family protection in the event of demise or protection on your debts.

If this is the sole criteria then it would be wise to go for pure term plan or term plan with returns of premiums. You get more life cover with minimal premiums.

Family protection: Click on the below ling to know how much life insurance cover do I need?

Protection on your debts: Go for a term plan against outstanding loans where you don’t have to invest higher premium.

Looking for investments with good returns.

The longer you invest the better you get the returns. Invest in a policy where the exposure to the equity is higher so that the investment would fetch you the good returns, of course there is high risk on your investment because the returns are entirely based on the market performance. If you are willing to invest for a longer period then it is considered to be safer side as the history of share market shows that the longer investment gets good returns over a period of time as compare to short term investment.

Child education and/or marriage.

Child policies are meant specifically to meet the milestone when child attained certain age. Do not invest into any policy other then the policy meant for child and choose the specific policy which gives you money back when a child attained at the age of 16, 18, and 21 so that all the educational and other such as marriage expenses should be taken care when it’s required.

Retirements.

The early you start saving for your retirements the more you can generate corpus in order to get more annuity (pension). It is contract with insurance company either to pay one time payment or a regular payments over a period of time to get the returns. You can decide what amount you want to receive to meet your expenses and the premiums will be calculated based on your requirements. Even you can decide vesting age (age at which policy holder starts receiving pension) and up to what age you want to receive annuity.

At the time of maturity, you can buy the annuity from any life insurance company who gives you higher rate of interest. It is not compulsion to take annuity from the same company. 1/3 of annuity can be taken back as lump sum and remaining will receive periodic payments from the insurance company.

Tax Saving.

Tax saving is application for life insurance policy under sec 80C and 10(10D) of income tax act.

Sec 80C of income tax act.

Up to Rs 1 lakh can be invested under sec 80C of income tax act except Rs 10000 in case of pension plan.

Schemes eligible for Section 80C benefits

Life Insurance.
ELSS ( Mutual Funds)
PPF
NSC
Senior Citizen Saving Scheme
Deposits in Post Office

Sec 10(10)D of income tax act.

Returns on invests under life insurance policy is exempt form tax. To avail the 10(10D) benefits, your total premium in a financial year should not exceed 20% of your total sum assured.

Premiums.

Last but not the least, to what extend you can afford to pay the premium for next how many years. Select the premium that you can pay for certain period of time depending up on the pay term chosen by you. Bear in mind this is the commitment which is go to pay by you on regularly basis either in the form of monthly, quarterly, semi annually or annually.

Once you decided upon which policy you are planning to go with, the next obstacle you come across is, what company to invest in? Here you need to do some home work by comparing the fund performance over a period of time with the different insurance companies. You can invest into the product based on the good performance given by a company.

All the insurance companies who come under the guidelines of IRDA are equally trustworthy. No matter which insurance company you choose.