Here are 5 key things about life insurance that are important to understand before you get a policy for yourself or your family members.
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New Delhi: Life insurance is a contract between you and an insurance company. According to this fiscal contract, the insurance company agrees to pay your beneficiaries a certain amount of money if you pass away within the policy’s term in return for your premium payments. The ability to help safeguard your loved ones’ financial security in the event of your passing is a feature shared by all the various forms of life insurance plans and is its most critical benefit.
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The following five key things related are important for you to understand before you sign up for a life insurance policy for yourself or your family members:
1. Life Insurance Is Not An Investment option.
One of the most important financial lessons that a lot of people don’t know is to not combine your investments with your insurance. You are protected from unforeseen events through life insurance. On the other hand, investing helps your money increase and flourish. Your investing expectations will never be met if you use life insurance for investment purposes.
2. Amount of Coverage Of The Policy
The amount of life insurance coverage you need is the first thing you need to get right. Your coverage should be large enough to protect your family financially, but not so large that you cannot afford the premiums. Generally, it’s recommended that you purchase a life insurance policy with a death benefit that is at least 10 to 15 times your annual income.
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3. Years Of Policy Coverage
The tenure of coverage is the length of time that your life insurance policy will be in effect. It is important to choose a tenure that is long enough to protect your family financially but not so long that you cannot afford the premiums. Ideally, you should choose a tenure that lasts at least until you retire.
4. Frequency Of Premium Payments
Knowing how frequently you can pay a premium is the next thing you should know. You can pay your premiums in a variety of ways, either in one lump sum or at regular intervals like monthly, quarterly, or yearly. Almost all life insurance companies accept payments in these ways. Determine what will suit you best and decide.
5. Claim Settlement Ratio
By examining the effectiveness and efficiency of the claim settlement process, you can gain insight into a company’s claim resolution procedure. Additionally, it is possible to look at a company’s claim settlement ratio. When compared to the number of claims the company received, this ratio shows how many claims the company has resolved. A business with a higher Claim Settlement Ratio is a good choice for a life insurance policy.
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