What basic features should you look for in a life insurance policy?

I want to buy a life insurance policy. What basic features should I look for in a life insurance policy? What important things should I keep in mind before buying one?

—Name hidden on request

A standard term life insurance policy is similar from one insurer to another. It is the first and most important life insurance policy to buy. Temporary plans cover death for any reason and exclude suicide in the first year. These plans offer a lump sum to the nominee in the event of the death of the insured. In most cases, this standard term plan is recommended. A few regular term plans offer terminal illness as a built-in function.

There are several variations of a term plan which is designed based on these basic features. These variants can be chosen according to the specific needs of the policyholder. For example, if the candidate is not financially savvy, the death benefit can be used in monthly installments rather than a lump sum. A few plans offer higher profitability through different premium payment options. These include premium refund options or limited premium payment terms. To understand the cost-benefit ratio of these options, it is best to consult a financial advisor. These can be traditional endowment plans or Ulips (unit-linked insurance). In traditional endowment, you should look at the historical returns provided by the insurer. These returns need to be looked at in terms of IRR. For Ulips too, the performance of the fund is an important criterion.

Can I buy two term life insurance policies and nominate separate candidates for them? So that in the event of an unfortunate event, both nominees receive payment? In one policy, I will designate my wife as the nominee and in another policy, my mother.

—Name hidden on request

Yes, you can buy two separate plans and appoint different people for each plan. The claims process of the two regimes will operate completely independently. Both applicants will be required to submit separate claim documents.

The same goal can also be achieved within a single plan. Within the same term plan, you can appoint two people and define their respective share. There would only be one complaint to file. The insurers will pay the proceeds of the claim as defined in the policy to the respective bank accounts of the named persons.

Abhishek Bondia is Managing Director and Managing Director of SecureNow.in.

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