Getting a life insurance policy is a big deal. It is a very crucial part of your financial portfolio as it is the cushion that protects from the financial impact of the loss of the life of a breadwinner. It extends financial protection in the form of death benefits to the family or beneficiaries of the lost life. Considering that life is full of uncertainties, it is important to minimise the impact of such eventualities as death, permanent partial disability etc. Such incidents can leave on unfit for work and thus, compromise the ability to be able to look after the family. Life insurance can be a literal life-saver. Since it is such an important tool, you need to dive into the situation, fully informed. Here are a few life insurance FAQs you need to have the answers to before you fill a life insurance form.
What amount should the life insurance form reflect? What should be the policy amount?
The amount of financial cover i.e. the amount received on maturity of the policy depends on the premium paid during the policy term. You should arrive at this figure after assessing parameters like your standard of living, income, spending habits, number of dependents, any liabilities you currently have etc. As a ballpark figure, the maturity amount should be equal to 8-10 times of your annual salary. The governing principle here should be to provide financial comfort for your dependents such that they can go on with their lives, without having to compromise on their lifestyle.
How do you want to pay the premium for the policy?
Usually, the options available to you for premium payments are monthly, quarterly, half-yearly or yearly. You can also choose to pay the entire premium due in one lump sum. Usually monthly or yearly modes are the more popular ones due to the tax-saving and the ease in monitoring. The premium payment mode is one of the key life insurance form questions, so decide ahead. For example, the Canara HSBC Oriental Bank of Commerce Life Insurance iSelect Term Plan allows for a yearly or monthly payment mode.
What duration do I want my life insurance policy to be?
Your life insurance form will also ask for the preferred duration of your policy in the case of term insurance. The ideal duration of a life insurance policy varies from one person to another - the policy period should be enough to give your family or dependents or beneficiaries enough time to become financially independent.
What are the settlement options?
Settlement options refer to how the policyholder wants to receive the proceeds at the time of maturity. Simple details like whether you want it to be a regular, recurring payment or a lump sum disbursal are chalked out in life insurance forms. The specific terms and conditions of the settlement options are defined.
Who are the beneficiaries?
Your beneficiaries are the people who receive the proceeds from the death benefits under life insurance in the event of your unfortunate demise. These people are named in the policy as such and would include all the people who depend on you, financially. These can include elderly parents, young kids, partner etc.
What riders would you opt for?
Riders are additional covers given over and above the basic life insurance cover. Since a rider acts as an additional cover, the life insurance cover and death benefits stay intact even if the rider benefits have been drawn. Usually, riders are available for specific events like a critical illness diagnosis. These have to be mentioned in the life insurance forms.
Apart from these life insurance form questions, you need to fill up general personal details, medical history and family history. Make sure you select an insurance policy that caters to your needs and the needs of your loved ones in your absence. Choosing the right tenor, amount, cover, rider etc could make all the difference.
