Four essential questions to have answers to while buying a Life Insurance

Last Updated: Wed, Nov 21, 2018 16:01 hrs

As per a recent survey, consumers have indicated numerous reasons including 'tax saving tool' and 'death benefits' for buying a life insurance.

No doubt, Life insurance is indeed the best possible way to secure the future of your family. The insurer takes care of your family in your absence and makes financial support available in days of hardships. Moreover, as it involves your family, you must be wise enough to make this investment and also consider numerous factors before investing.

But often, people get scared listening or even discussing about life insurance plans. After all who likes to talk about death?

It takes a lot of time for people to understand that life insurance plan is a safe and secured investment for protecting the future of their family. To help you better, you can always seek the life insurance advice from the insurers as when armed with the appropriate information and facts, you can confidently make a correct decision and arrive at the right choice for you and your family.

To help you better, here are some big questions you must always ask your insurer while investing in life insurance.

How do you calculate the total sum insured?

As per numerous research papers and surveys, "How much life insurance do I need?" remains the primary question of almost every person who plans to buy a life insurance. Yes, we all have heard the different "rules of thumb" that talk about how much life insurance you need - most common being 10 - 15 times of the annual income, but death benefit tends to be a very individual calculation.

Do always make sure to ask your agent about what assets and obligations he plans to consider while reaching a recommended amount. Never get driven by everything the agent says, rather make sure the reasoning he offers makes sense.

How to decide the term of the insurance?

Once you have finally zeroed in on the actual policy amount, the next big step is to decide how long you need the insurance. Life policies last for a specified period - often 10, 20, 30 or 40 years.

The perfect life for you completely depends on why you need the insurance.

If you plan to buy the insurance to repay a short-life debt, a 10-year policy would be enough. But yes, if you want to make sure your spouse, children and family enjoys a comfortable lifestyle without your income, a 30 or 40 years policy must be a better option.

Discuss your circumstances and plans with your agent in detail so that you can get better assistance on finding the appropriate coverage. However, in case your insurer recommends certain policy, it's wise to find out why. This is because many insurers are paid higher commissions by some companies. In case you feel you are being pressurized, be direct and ask them about the differences in the commission.

When and how to pay the premium?

After you have finally agreed upon taking a particular life plan, it is time to determine how much you can afford to pay as a premium. And most importantly, you need to ask your insurer when you have to actually pay the premium - monthly, quarterly, half-yearly or annually.

It is not always important that everyone has a fixed or regular source of income, and for them it will not be convenient to pay monthly premium.

If the period of paying the premium affects you significantly, it is advised that you discuss the plan with your insurer well in advance.

There are a number of life plans available in the market that allows you to pay your insurance premiums annually, half-yearly and even quarterly and monthly.

Which payout option to choose?

Initially, life insurance was considered to be one of the most convenient financial products as it offered a lump sum payment to the beneficiary on the death of the policyholder. However, things have significantly changed now as the insurers have now introduced different variations in the payout plan.

These variations aim at benefiting the beneficiary by giving them different options to receive the total sum assured. Apart from the regular lump sum payout plan, the beneficiary can opt for a staggered pay-out plan and customize the plan as per specific needs and requirements. No doubt, the variations have made it more convenient to understand term plan payout.

Dependents who cannot take required financial decisions, a staggered payout plan is best. Under a staggered payout option, the beneficiary receives some portion or percentage of total sum assured as lump sum and the remaining amount is received in the form of monthly payments over a pre-decided period that is generally 15-20 years.

Santosh Agarwal is an Associate Director and Cluster Head for Life Insurance at, a leading online insurance service provider.

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