How To Choose The Right Life Insurance Policy in India 2021

The advent of the coronavirus pandemic has increased dangers to one’s health and life. Hence, it has become even more important to have a good life insurance policy to financially protect your family from all possible difficulties in the future. Some life insurance policies also have an investment component, which help you consistently increase your savings while simultaneous providing you with life cover. However, before choosing a life insurance policy, one much look at different types of life insurance plans offered in India:

Types of life insurance in India 2021

1. Basic term insurance plan

This life insurance provides you with life cover for a specific time period (10,20,30 years) and is the lowest costing type of life insurance, with payout of death benefit in case of death.

2. Term insurance with return of premium

Unlike basic term insurance, this plan provides a maturity benefit and returns the premiums you paid if you survive the term period, without any interest additions. However, this usually costs more than basic term insurance plans.

3. Unit Linked Insurance Plan (ULIP)

ULIP is a life insurance plan wherein a portion of will be invested into debt and/or equity instruments, and the rest will go towards providing life cover. It allows you to meet both your insurance and investment goals under a single plan, and is subject to market returns. 

4. Endowment plans

Endowment life insurance plans provide you with the dual benefit of saving and life insurance, and payout maturity amount in case of critical illness, death or maturity of policy. They provide various tax benefits, can help fulfill long-term goals and provide you with life cover as well. The most popular endowment policies include ULIPs, profit-sharing endowments, and guaranteed endowment policy.

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5. Money Back policy

Unlike other life insurance plans, money back policies provide returns at regular intervals, and help maintain liquidity. As the money returned through payout of survival benefits during the policy can be used to pay future premiums, it can help reduce the total amount invested in your life insurance plan.

6. Whole Life Insurance

This life insurance policy provides you with life cover for your entire life (100 years), and provides a death or maturity benefit. A key feature of this plan is that some plans allow the insurer to pay the premiums in the first 5-10 years but provide life cover for the entire duration.

7. Group Life Insurance

Group Life insurance is usually provided by employers, and provides life cover to the entire group. However, these policies only remain valid until you are part of the group.

8. Child Insurance Plan

A child insurance plan allows you to invest for your child’s financial needs, and provides flexible payout options along with life cover. These plans can be started from the birth of a child.

9. Retirement Life Insurance Plan 

Retirement life insurance plan helps you generate income after retirement in the form of a guaranteed pension, and also provides life cover and death benefit to your chosen nominee. They help meet both you and your family’s needs.

With so many different types of life insurance plans available, it can be a mind-boggling task to choose the right life insurance plan for you. Should one look for the lowest premiums, or go for the highest returns and benefits? 

To solve this problem, we have a prepared a list of tips that will help you select the right life insurance plan for you in India 2021:

Know your goals and financial needs

Are you buying life insurance to protect your family, or as a tax-free investment option to meet your life goals? Would you prefer to opt for a higher premium for higher maturity benefits, or wish to keep your insurance costs at a minimum? One must answer these questions to know which type of life insurance policy they should choose from. Knowing your own goals and financial abilities is a great perquisite before choosing a life insurance plan. In general, people opt for basic term insurance because of its low premiums, although endowment plans are financially more prudent in the long term because of their maturity benefits.

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Investment vs insurance

One key question to ask yourself is whether you are buying life insurance for investment purposes, or for only life insurance. Some people see buying insurance and investing as completely separate activities, and hence opt for the most affordable term insurance plan while investing with their own discretion. However, investment through life insurance plans provide tax benefits and guaranteed returns, which can be difficult to outperform for common investors. If you choose to invest on your own, we have made a list of tips to help you choose the right stocks for the long-term, as well as to help you choose the right mutual fund in India. Generally, acquiring investing knowledge can help you generate higher returns than from investment-based life insurance policies in the long-term, though life insurance offers a risk-free return component and helps you earn extra income from your insurance expenses.

Compare premiums and cover

Without a doubt, one must cover the premiums and life cover benefits provided to choose the right life insurance plan. Sites like PolicyBazaar and Insurance Dekho can help you compare premiums for similar types of life insurance plans from different companies, although you must keep in mind that the company with the lowest premiums should also have high-quality customer service. Also, a factor that impacts the total maturity benefit is the bonus component present in some life insurance plans, which can be linked to the market returns or the company’s profits.

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Compare claim settlement ratios of different companies

When buying life insurance, it is extremely important to choose the right company that has an efficient claim settlement process to avoid unnecessary hassle. Insurance companies with a high claim settlement ratio usually provide excellent claim processing and customer service, which enables them to settle the majority of the claims they receive. However, smaller companies may have a higher claim settlement ratio simply because it’s easier to process fewer claims, and may not necessarily provide the best services. So how does one choose the right life insurance company? Here is our list of the top life insurance companies in India 2021 based on both claim settlement ratio and market share, which will help you choose from the best and most prominent life insurance companies in India.

That concludes our list of tips to help you choose the right life insurance policy in India 2021. One must be aware of their life goals and financial needs, whether the purpose of their life insurance policy is investment and/or insurance, and choose life insurance from the companies that offer a combination of affordable premiums, attractive benefits and efficient customer service. We hope this article helped you gain more clarity regarding choosing a life insurance plan in India. If you liked this article, please comment below and share.

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