Life insurance plans provide financial security to your family in the event of your unexpected demise. Insurers have been introducing various life insurance products with customisable features to enhance the financial benefits by satisfying savings and investment goals for their policyholders. Therefore, understanding your financial needs and comparing the different products will help you make the right choice. So, how can you go about doing that right? Well, here are a few steps to help you out!

Before we start, it is important to understand what a life insurance plan means and its different types to make the right choice.

What is a Life Insurance Policy?

A life insurance policy is a financial agreement between you and your insurance provider. According to the agreement, your insurance provider will agree to pay a financial death benefit to your family in the event of your unexpected demise. In addition, life insurance plans provide flexible features and add-ons options to enhance the financial benefits.

There are different types of life insurance plans.

• Savings insurance plans provide a life cover and a guaranteed¹ return as a maturity benefit. Thus, it helps in securing your family and savings funds for accomplishing your future money goals.
  
  
• Unit-linked insurance plans(ULIPPlans) provide a life cover and market-linked returns as a maturity benefit. You can invest in the fund options based on your risk profile, such as the equity, hybrid and debt funds.
  
  
• Retirement plans provide options to ensure a regular income for your life after retirement. You can choose between the immediate and the deferred annuity plans.
  
  

How to Choose the apt Life Insurance Plan?

Choosing theapt life insurance plan becomes important to ascertain the required financial benefits for your family. Here are a few steps to help you choose the ideal life insurance plan.

• Analyse your financial condition - When you analyse your family's current financial condition, you will be able to understand your future financial requirements and affordability. Your future financial requirements can be to help your family with routine expenses or accomplish money goals such as getting your child married. And affordability will be based on what amount you can save in the life insurance annually without affecting your current lifestyle. Also, based on this analysis, you can decide on the type of life insurance plan required. For example, you can choose the term insurance, savings insurance or the ULIPplan based on your requirements.
  
  
• Decide on the required life cover - After analysing your family's financial condition, you need to determine the life coverage required from the life insurance policy considering your age, years to retirement, assets and liabilities to decide the apt life insurance policy that can provide the required life cover at an affordable price. You can consider different methods to calculate the same.
  
  
  • Income replacement method - You can consider your age, the number of dependents in your family, and your current income to decide the life cover. It will be the amount that will replace your income for your family's survival.
    
    
  • Expenses method - You can consider your routine expenses and the short-term and long-term financial goals accounting for the inflation rate to determine the required funds. You can seek the help of an insurance advisor to calculate such financial requirements.
    
    
  • Human life value method - Human life value indicates the present value of the future incomes, expenses, liabilities and assets. It is your monetary value that helps determine the life cover. You can use online tools such as the human life value calculator to help determine this value effortlessly. The life cover calculator will ask you to input a few personal details and other financial information to determine the appropriate value for your financial requirement.
    
    
  • Thumb rule - You can also use the general thumb rule of choosing ten times your current annual income as the required life cover.
  
  Based on your current financial condition and future goals, you can decide on the required funds apart from the life cover if you have decided to save in life insurance plans for savings and investment benefits.
  
  
• Analyze insurance plans - Now that you have realised the required life cover and the future savings and investment benefits, you can decide on the life insurance policy by analyzingthe features, cost, claim settlement processes, etc.,
  
  
  • Flexible features - Insurers provide the apt life insurance plans with various flexible features, such as choosing between the single, limited premium and regular premium payment method, lump sum, regular income or a combination of the two for the payout, etc. For example, you can pay the premium for the savings insurance plan for a limited term and choose to receive the guaranteed¹ returns at the end of the policy tenure as a regular income for a fixed period or until death.
    
    
  • Processes and customer service - Ensure you choose the insurance provider who can provide the required services through simple and efficient online cost-efficient processes to save time and effort.
    
    
•  Decide on the inclusion of add-on riders^# - Life insurance plans provide additional rider^# options to enhance the financial benefits. For example, the rider^# for the critical illness benefit will provide a lump sum to manage your hospitalisation and medical expenses during the policy term if you are affected due to a critical illness. There are rider^# options for minor and major illnesses, total and permanent disability, accidental death, etc.
  
  
• Decide the policy tenure and the premium - The apt life insurance plan will serve your financial needs only when you stay invested throughout the policy term. Therefore, choosing the required policy tenure and an affordable premium  is important.
  
  

When you have analysed your financial needs, analyzed the different life insurance options, decided on the apt option, included the right add-on riders^# and decided on the right policy tenure and premium, you have arrived at the ideal life insurance plan!

L&C/Advt/2022/Nov/2943