How to Choose Insurance Policy? — What Should I Know About My Insurance?
Hey guys……happy to be back again to continue our discussions about insurance. So far in this series about insurance we have discussed why do we need it, how many types of insurances are there including Life Insurance and who needs Life Insurance. In the previous post, we had also discussed how to effectively plan for insurance premiums to reduce the sting of premiums and how to save that little extra to judiciously utilise it someplace else for creating wealth. Today in this culminating post for this series, let us discuss the most important question, “how to choose the right Insurance from the multiple options available in the market and what one must know about his / her insurance policy before buying it”.
Ok…..before getting technical, lets understand one thing absolutely clearly that any insurance policy be that Life Insurance, Vehicle Insurance, Home Insurance or any other general purpose insurance is a legal contract with clearly defined terms of the contract. Therefore, no promises by the insurance advisers are tenable if these are not reflected in the insurance policy. The only way to be 100% sure of what you are covered for and what you will get, is to read the policy document carefully, prior signing the contract terms.
In todays world of commercialisation where insurance too has become a financial product being offered by many companies for similar terms, how to choose the best deal for yourself is a little subjective. This primarily is governed by your specific financial needs, risk taking tendencies and also faith / brand loyalty towards particular insurance company. I am sure many among us, still consider LIC as a first choice for Life Insurance despite presence of many other insurance companies offering similar products. In a such scenario, it is advisable to list down your expectations in order of priority from the insurance policy well in advance and certainly before looking at any sales brochure from any company which may colour your perception. These expectations may include the total sum which you want to receive in case of unfortunate occurrence of an event, certain added benefits such as option to increase insurance amount with time, inclusion of additional beneficiary, tax benefits etc. Feel free to add or delete in this list as per your requirements.
Once you have a rough idea about what you are looking for, what should be the sum insured and your capacity of paying premiums, it is now time to do some window shopping. In todays world of information technology, it is best to take out some time and do some preliminary research on the internet. Some of us may still prefer consulting our friendly neighbourhood insurance advisor. However, even for those people, I would advise to invest some time in own research before consulting an insurance agent or advisor. The more informed you are as a customer, greater details will be divulged by the person briefing these products to you. For those, who like me, would prefer to do own online research, there are many aggregators such as Policy Bazar who compile and provide multiple options for all kinds of insurances. In fact these aggregators are a one stop solution for all insurance needs.
How to Select the Right Insurance — Now is the time to take a pen and paper and for those who are comfortable with Excel to open a new sheet for comparing all the available options.
Step 1 — Choose the category which you are interested in. This is the easy step, if you are looking for general purpose insurances such as house insurance or vehicle insurance. However, if you are looking for life insurance, this is a tricky part as now you would have to make a choice between so many options from Term Insurance, Term Insurance with Return of Premium, Money Back Policies, Endowment Plans, Whole Life Insurance etc. Please do not be in a hurry, if you do not have a ready answer. Discuss the minutest issue in detail with your spouse or beneficiaries about the available options, before arriving at any decision. Take time to decide, your option once selected is for your life and hence delay of few days are not going to make any significant difference.
Step 2 — Start populating the fields in your Excel sheet or on your paper with data from various options available. The fields which are must for consideration are:- sum insured value, premium amount, essential requirements from the insurance house (mandatory health check-up), riders* & waivers* and also inclusions and omissions etc. Once again feel free to customise this sheet …..after all this is your sheet (ha..ha….ha…)
- Riders — These are optional coverage for a certain cost, which the standard policy does not cover but may be important to you to cover certain life events.
- Waivers — These are generally referred to waiving of premiums in case of disability affecting earning potential but may also include waiving of certain terms of policy in favour of the policy holder in specific circumstances.
Step 3 — Choose an aggregator such as Policy Bazar or any of its competitors such as Coalition, Bestow, Digit Insurance, Spruce Holdings, Acko General Insurance etc to also check relative performance of insurance companies in claim settlement, customer satisfaction ratings before making a final decision.
Step 4 — Now select the insurance policy which you feel best suits your requirements and is most economical. Always prefer insurance products from companies which have higher customer ratings and claim settlement percentages over companies with poor track records.
Step 5 — Check options for paying premiums. If options exist for yearly, quarterly or monthly payment of premiums, strictly from financial point of view, it would be advantageous to opt for longer duration premium as this generally offer discount of 2 to 5%.
No matter which policy or company you select, insist on draft policy document to be shared with you. Read this document with hawk’s eyes to see you clearly understand all the terms of the contract. In case you do not understand certain terms, either google it or ask the executive of the aggregator or your insurance advisor to explain these to you. And yes……..even the online aggregators have executives to help you. These are generally from their sales team but can arrange a call back from the expert or the company representative to clarify all your doubts. Do not sign the documents or pay premium till you are satisfied.
Lastly, this may not work all the times, but there is no harm in negotiating your policy with the company representative. You can negotiate about certain restrictive clauses of the policy or even the cost of premium. For example:- You may have a brand loyalty towards certain insurance company and therefore want to take insurance from it, but the premium from this company may be higher than others. In such a scenario, if you approach the company and negotiate with them, you may get a discounted premium or few additional benefits added to your policy.
That’s all for this post guys…..I hope you will enjoy reading it too like previous posts. Many of my young readers have commented that this subject do not concern them for some foreseeable future. But guys, knowledge to do the right thing is power……and in today’s world especially post Corona, it is better to secure your plans with small general purpose insurances such as travel or health than bear the full burden of the cost. If you know about this subject, it might help you to make better choices knowingly or unknowingly every time you are buying airline tickets, booking train tickets, insuring your vehicles or just helping your friends and family to choose any insurance related products.
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