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Saturday, May 18, 2024

15 Tips to Buy a Life Insurance Plan for Yourself

We are becoming increasingly foresighted about our future especially after the pandemic hit the entire world. Therefore, to attain financial security, our interest in buying the most suitable life insurance for ourselves has also increased.

However, not every life insurance plan suitable and appropriate for one can be perfect for another. So you may think what type of life insurance should I buy that fully meets my needs? The answer to the question is it depends.

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The type of life insurance that you wish to buy depends on what you wish to protect. You should also ask yourself when can you activate or cancel your life insurance. What is the cost of life insurance?

Knowing the answers to these questions before buying life insurance for yourself is essential. Therefore, we have selected some simple tips that will guide you to buy the best life insurance plan for yourself.

  1. Understand insurance is not an investment but protection

If you are looking for an investment channel that brings high-interest rates and profitability, life insurance does not help do that. In essence, the core value of insurance is to protect your finances against risks.

This value will be most clearly shown when unexpected incidents occur and your financial capacity is affected. Any profitable investment brings potential risks, but investing in insurance gives you safety, ensuring you and your family in the future. Don’t compare insurance with another investment channel because they have completely different meanings.

  1. Choose the right age to buy your life insurance plan

Age plays a direct role in determining your life insurance cost and benefits. Many people ask if they can buy life insurance at the age of 60. the answer is yes but the premiums or the monthly instalment that you have to pay can be expensive. Plus, most of life insurance companies will offer fewer benefits if you take out life insurance at this age.

Although the age range specified for buying a life insurance policy is from 18 to 60 years, you should consider purchasing the right plan as soon as possible. So it’s easy to get approved, you can get numerous benefits, and arrange comprehensive protection for your family.

So the ideal age to buy a life insurance plan for yourself is from 30 to 45 years. At the golden milestone of age 30, you should participate in life insurance attached to complementary products.

At this time, you can protect against the risk of death or total permanent disability. You can also increase your healthcare solution by combining it with complementary products that provide protection benefits. Such as support for hospital fees, medication costs, surgery or emergency medical expenses, treatment at modern medical systems at home and abroad, dental care, and maternity care.

  1. Choose the capital to insure

A good way to calculate the capital you want to insure is to take your net annual income and multiply it by 3, 4, or 5 years. For example, if your net annual income is around NPR 2,000,00, for 5 years it would be NPR 1,000,000 of guaranteed sum.

In this case, if one of the unexpected events covered by your policy were to occur, your loved ones could live on an income for 5 years. Thus having time to reorganize themselves, always benefiting from your support. This is just a suggestion, the choice of the sum to guarantee to the people dear to you depends only on you, your needs, and your sensitivity.

  1. Choose the duration of your life insurance plan

Determining how long you are going to take the life insurance plan for yourself is an important step. In order to calculate the duration of your life insurance plan, think about the person you want to protect.

How long that person will need your financial support? For example, if you want to secure the future of your child, you may have to think about how many years your child may be away from financial independence.

  1. Pay attention to your lifestyle

Observing your needs and what is a priority for the moment you are living in is an important part of the process. Today, there is a wide range of insurance plans on the market. It is necessary to evaluate what is really necessary for your lifestyle, but always think about adapting this protection throughout your life.

For example, there is term life insurance which can cover you for a specified period such as 5 10, or 20 years. The premium for such insurance is low. There is whole life insurance which can protect you for your entire life but the premium can be quite high.

So you need to consider your income, your mortgages if any, and any other financial responsibilities you have. Then assess how much you can set aside for paying the monthly installment.

  1. Determine the amount you have to pay as the premium and find the policy that offers the best offer

You can use online premium calculators to find out how much premium you need to pay for the required amount of life insurance. Compare different plans to find a policy that offers the most coverage at rates that fit your budget. You should also evaluate the premium payment term based on your earnings for the coming years.

  1. Select the correct policy term

The term of the life insurance policy should be the number of years your family will be financially dependent on you. The general rule for deducting the ideal term of the policy is to subtract your current age from the age at which you expect the income to stop or you want to fulfill a certain life goal.

  1. Read the terms carefully

Before signing the life insurance plan, you need to carefully read information such as: how long the term, is and how much is allocated between the main insurance product and accompanying health insurance products.

Is the insurance package optimal? Are the benefits offered necessary, complementary, or overlapping? What are the benefits when an insurance event occurs, benefits upon maturity, and other financial benefits that arise, if any? What are the conditions for receiving each benefit?

If reading a life insurance plan is too much for you, ask the insurance agent to explain it to you carefully, and make an appointment with an experienced personal financial planner you know to help check the authenticity. In short, check many sources to understand your rights/limits of protection/cases of refusal to pay/how not to violate terms and notes to ensure contract rights.

  1. Opt for a reliable life insurance company

When we think about a product for long-term use, contracting it with a solid company is crucial. This is certainly the case with insurance – an item that must accompany the insured person during all stages of their life, guaranteeing benefits for longevity.

Peace of mind about the correct investment is a fundamental part of purchasing a solution that is directly linked to the future. Therefore, research the insurance company carefully when purchasing a product to protect yourself, your family members, and your assets.

Generally, life insurance companies with a Claim Settlement Ratio (CSR) of over 95% for consecutive years are considered trustworthy. CSR is the percentage of claims that the company settled in a financial year compared to the number of claims placed.

You can visit the Nepal Insurance Authority website to see the updated CSR of various life insurance companies in Nepal. It is also advisable to read customer reviews and understand if the claims service provided by your life insurer is fast and hassle-free.

  1. Choose the comprehensive plan

Medical expenses can negatively affect your income. Therefore, it is necessary to choose a comprehensive plan with appropriate riders for you:

  • Some insurance companies offer full payment of the claim if you are diagnosed with any serious medical condition, such as kidney failure, cancer, or heart disease. This amount can be useful to cover treatment costs and to protect you against loss of income due to such illnesses.
  • Accidental Death Beneficiary provides your loved ones with an additional amount in the event of your sudden death from the cause of an accident. This protects your family’s future from the threat of affecting your regular income stream to maintain your current lifestyle.
  • Additional permanent disability options work as a waiver for all future premiums if you are permanently disabled due to an accident. Your life cover continues for the remainder of the policy term.
  • Additional terminal illness options give you access to funds to deal with terminal illnesses such as cancer by providing a full payout before death

It would be helpful if you always look for an insurance provider that offers such benefits without charging you hidden fees.

  1. Ask for advice

Financial advisors and accountants are the people you need to meet and listen to advice before signing an insurance contract. Remember that life insurance is for the living, not the deceased. In addition to providing death benefits to beneficiaries, life insurance policies can increase asset value over time and provide tax-free benefits.

For a comprehensive evaluation of the life insurance plan you wish to buy, you can consult a financial advisor. They will help review each individual’s financial situation, goals, and estate plans. After a comprehensive evaluation, a financial advisor will recommend that each person pursue long-term care life insurance, disability insurance, or a combination of both long-term and permanent.

Now, if you desire to enjoy tax benefits, you can consult an accountant before buying a life insurance plan. It’s because you won’t have to pay taxes on the proceeds from your life insurance settlement.

This is why many rich people choose permanent life insurance. Individuals with high net worth often take out permanent insurance policies to enjoy tax benefits. An accountant can tell you which permanent life insurance product best maximizes tax benefits.

  1. Do not entrust all responsibility to the insurance consultant

We have asked you to consult a financial advisor before buying a suitable life insurance for yourself. However, do not trust all responsibility to your advisor. The insurance contract is for you to choose, pay the premium, and enjoy the insurance benefits.

No matter how well the consultant can advise and support you, the insurance company is the organization that pays your benefits, so you should be responsible for your own premiums and insurance benefits. Take time to carefully read the contract terms and thoroughly understand the questions in the contract through the consultant’s answers.

  1. Declare information in the questions in the insurance application accurately and honestly

Providing accurate and truthful information when purchasing life insurance helps the insurer understand your needs and suggest optimal solutions for you. It also helps you protect your rights and benefits according to the insurance company’s policies and terms when an incident occurs.

The basic information requirements the company will ask you to complete include an insurance request form with personal information, insurance product information that needs to be included, and related questions about health status, current insurance contracts, etc.

You should carefully read all the information required to be provided in the insurance contract. Such as all information items and questions, especially paying attention to relevant information about your current and future health.

Provide the insurance company with current and past medical records as detailed as possible because the contract has a clause excluding diseases that cannot be purchased with life insurance.

Check all the declared information again to see if it is correct. In addition, the insurance company requires customers to perform health checkups. So do not omit the information regarding your health.

If you provide inaccurate information, the insurance company will consider this act as a violation of the policy terms. The company can cancel your reimbursement and can even sue you for providing incorrect information.

  1. Notify immediately if a change in your personal information occurs

As life is unpredictable, changes can happen. Your marital status can change, you may wish to change your beneficiary, and so on. In such a case, you should immediately inform the insurance company that you want to adjust your information and seek their expert advice on the exact process for adjusting information.

This is very important in the process of paying insurance benefits later when the risk occurs. Always update your personal information related to your life insurance contract when there are adjustments or changes. So that the company can carry out your insurance plan in accordance with your commitments as well as protect your own rights.

  1. Choose a quick compensation service

Digital insurance processes and services create simplicity and optimization for both users and businesses. Online services help buyers be flexible and fully proactive instead of having to go through consulting agents like before. In particular, transparent and quick compensation service is a legitimate requirement of the insurance buyer.

In response to this, many insurance businesses apply 24/7 consulting to support participants in completing the benefits compensation process with simple and convenient procedures. Therefore, you should also consider the complexity of the claiming process, adjusting information, or premiums. So you can easily send requests and monitor processing status anytime, anywhere.

  1. Cancellation of life insurance plan

If you cancel your life insurance plan, you will lose the benefits stated in the contract as well as the insurance premiums paid. The contract has detailed provisions about the insurance not forming a surrender value in the first two years of insurance. If you have difficulty or financial problems, you can propose reducing insurance premiums or extending or reinstating the contract after a specific time to reduce losses.

Final words

Buying life insurance for yourself is not that complicated if you understand thoroughly what life insurance is, how it works, and what type to purchase. However, remember life insurance comes with added financial responsibility.

You have to set aside a certain amount to pay monthly premiums. Also, you may be looking for some cheaper options but you may go on purchasing the expensive ones even if don’t need the coverage mentioned in the insurance plan. Therefore, be very cautious and go through our tips to avoid any inconvenience in the future.

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