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7 Factors To Consider Before Buying Life Insurance

Ensuring your family's financial security is crucial. Life insurance serves as an essential financial decision that offers protection, savings, and tax benefits. It's important to thoroughly understand your options to choose a policy that aligns with your unique needs and goals. For example, you could be interested in buying term insurance to protect your loved ones, or an investment plan to save corpus for the future. But there are certain factors that must be kept in mind before you decide on buying the ideal life insurance policy. Let’s discuss here:

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What Are The 7 Factors To Consider Before Buying Life Insurance?

The 7 factors to consider before buying life insurance are:

  • Life cover amount 

  • The type of Policy 

  • Insurer’s claim settlement ratio 

  • Riders 

  • Premium payment mode 

  • Policy T&Cs 

  • Policy Exclusions 

Let’s understand these points in detail: 

  1. Life Cover Amount

    Ensure your cover amount is sufficient to protect your family but affordable for you. It should be large enough to cover your family's needs in your absence. Experts recommend to choose life cover that is at least 10-15 times your annual income for adequate protection. Use the term insurance calculator for a more precise estimate of your term insurance premiums.

  2. Policy Type

    Choose a policy that aligns with your needs and goals. Here are some common types:

    • Term Life Insurance: Provides high coverage at low premiums to protect your loved ones from life’s uncertainties.

    • Whole Life Insurance: Provides coverage up to 99 years, ensuring lifelong protection.

    • Term Return of Premium Plan: Provides term insurance benefits while returning all premiums after maturity.

    • No Cost Term Insurance Plan: Provides the option of exiting the term plan early (before maturity) and get back all premiums paid.

    • Unit Linked Insurance Plan (ULIP): Offers both investment and insurance benefits.

    • Endowment Life Insurance: Combines savings and insurance, offering a payout at the end of the policy term.

    • Child Insurance Plan: Focuses on securing your child's future goals, such as education and career.

    • Retirement/Pension Plan: Provides retirement benefits, ensuring a steady income post-retirement.

  3. Insurer’s Claim Settlement Ratio

    Many people consider the claim settlement ratio of life insurers as a measure of the certainty of claim settlement. However, the claim settlement ratio is not the only factor that matters.

    The claim settlement experience is the true test of your life insurance plan. Losing the breadwinner is already difficult for your family, and if they face challenges in receiving the financial support they need, it almost defeats the purpose of having life insurance.

    This is the reason why top insurers offer ‘claim guarantee conditions’ for life insurance policies. A claim guarantee ensures faster settlement if your policy meets certain conditions. For instance, Canara HSBC Life Insurance Company, with a claim settlement ratio of 99.23%, promises to settle a claim within a day if the policy meets the claim guarantee conditions.

  4. Additional Features of the Life Insurance Plan 

    Additional features help you create a stronger protection that helps to protect your family from a number of risks. Some of these additional features are: 

    • Accidental Disability Cover: Offers financial support in case of physical disability that results because of an accident. 

    • Critical Illness Cover: Offers financial support in case you get diagnosed with a life-threatening disease and require treatment for all these diseases. 

    • Waiver of Premium: Physical dis-abilities can limit your ability to earn money, but your family still needs the financial protection of life insurance. This option allows you to maintain your life cover after a permanent disability without paying additional premiums. 

    • Child Support Benefit: This optional benefit can be added to your base life cover to provide extra financial support for your child. 

    Additionally, options such as return of premium and limited premium payment terms can be beneficial for you. 

  5. Premium Payment Mode

    Choose between paying for a limited time or making regular payments (monthly, quarterly, semi-annual, or annual).

  6. Policy Terms and Conditions

    Review all terms and conditions carefully, including grace periods for late payments, any waiting periods before benefits start, and options for nominating beneficiaries. Check if the policy allows for loans, understand the surrender charges if you cancel early, and know the surrender value. This ensures you are fully aware of the policy's features and any potential limitations.

  7. Policy Exclusions 

    Understanding ‘what is life insurance’ and also ‘what is not covered in life insurance’ is equally important. Life insurance doesn’t cover death during adventurous sports that includes skydiving, bungee jumping, etc. Terrorist attack, war, rioting and death in some cases while driving under alcohol influence are also not included under term. 

    Therefore, choose a policy that not only secures your family's future but also offers convenience. With these five factors in place, you can confidently achieve this goal.

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What Are The Benefits Of Buying Life Insurance?

The benefits of buying life insurance are as follows:

  • Family's Financial Security: Ensures your family's financial stability if you pass away unfortunately, covering your family’s future expenses and maintaining their quality of life. You can buy the best term insurance plans from Policybazaar after you compare from amongst 15+ top Indian insurers.

  • Protection Against Critical Illness: Provides coverage for critical illnesses, easing medical expenses and ensuring your family's well-being during tough times, with the help of the critical illness rider.

  • Long-Term Coverage at Low Cost: Offers high coverage at affordable premiums, securing your family's future without straining your budget.

  • Create Wealth for Future Goals: Helps you save over the years, providing a financial foundation for future goals like your child's education or starting a business.

  • Secure Your Post-Retirement Life: Serves as a retirement planning tool, ensuring a steady income stream and maintaining your quality of life post-retirement.

  • Claim Tax Benefits: Offers tax benefits under Sections 80C and 10(10D) of the Income Tax Act, 1961, helping you save on taxes.

  • Get Peace of Mind: Provides peace of mind knowing your loved ones' financial future is secure, even during tough times.

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Wrapping It Up!

Life insurance serves as a safety net over your family's financial security. Beyond providing protection in case of your untimely demise, it encourages saving a corpus for the future, offers tax benefits, and supports long-term financial goals. Therefore, keep in mind the five key factors before you buy a life insurance plan.


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