Taking out a life insurance policy is not required by law but it offers peace of mind. In the event of any unfortunate events, you will have a way to financial security. However, countless insurance companies in the market offer this service.
Each of these companies provides countless products. So how do you know which insurance company is the best for you? The first thing is to identify your own needs and weigh whether the particular insurance company will satisfy your needs.
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There are also numerous guidelines with the help of which you can choose the right life insurance company or yourself. Here are some tips for you.
15 Tips to Help You Choose The Right Life Insurance Company
- Determine the correct identity
If you are determined to purchase the life insurance policy, you first must identify the insurance company. Some companies’ names sound the same. So you should be able to identify the insurance company you want to exchange your transaction with.
Assess the company’s logo, address, name, and registration. In Nepal, some people are unaware of the whereabouts of the company even after buying the policy. Therefore, you should identify the right company and analyze its information.
- Prices, services and comfort
The price and services offered by an insurance company should not be disputed. You may find a company with excellent service and that can offer you good prices for your insurance; if you know what elements influence the price of a policy and how to get discounts when purchasing life insurance.
Additionally, the price of your policy can vary greatly from one company to another, so you may want to contact several of them and compare their prices. Request at least three quotes (for the same product) from three different sources, whether from insurance agents or brokers, directly from the insurance company, or through the Internet.
- Don’t get tempted by low prices
While you should consider price when purchasing insurance, it should not be the only one. There are many reasons why prices differ between insurance companies. A lower price may mean that it has less coverage or a smaller amount of insured sum.
A smaller amount or less coverage doesn’t allow you to cover the expense that generates a risk at the time of the loss. Remember that risking having less coverage means more money out of your pocket when a loss occurs.
A lower price may also mean that the insurance company has entered a new market for them, so they may not have the experience of another insurer. In that sense, you must evaluate what is most important to you when purchasing a policy. Analyze insurance prices: Is your policy premium cost-effective compared to similar insurance companies? What are the deductibles?
- History of the company
It is important to know how long the company has been operating in the insurance market. If the company existed for a longer duration, it means the company has expertise in the field and is reliable and trustworthy. Its long existence characterizes its sustainability and planned development.
If the company has branches in various regions and has a longer list of insurance services, it’s more beneficial. The wider and more diverse the insurance portfolio, the safer and more reliable the insurance services of a given company. If the amount of payments significantly exceeds premium collections, then we can assume that the company will close soon.
- Find out what the authorized capital is
The authorized capital of an insurance company that does not engage in life insurance must be at least NPR 2.5 billion, for a company that enters into a life and health insurance agreement – 5 billion rupees. If a company has the minimum authorized capital, this should be a concern. In the event of massive payments, the company simply cannot cope with the influx and will go bankrupt.
When a company’s authorized capital is 3-5 times greater than the minimum, you can already consider cooperation with it – the chances that it will go bankrupt are small. A company’s assets also affect its financial stability. If anything happens, the company can sell its assets and can pay off people’s debts. The more assets, the more stable the company.
The insurance company takes risks when it undertakes to pay compensation for insured events. Sometimes, conditions may occur when the company has to pay all its policyholders. So if it has enough assets, it can pay off its liabilities.
- Identify the product
Insurance policies are products designed in order to meet the various needs of an insured. Insurance providers offer innovative products according to different stages of life. The most advisable thing is that you make a list of the needs you currently have.
This way you will guarantee an adequate choice of companies that offer products tailored to what you require. And of course: ask yourself the following questions: Is the insurer a specialist in this area of insurance coverage? Will it provide adequate insurance coverage for my needs?
- Check for company license
You should never forget to check for an insurance company license when conducting a transaction. Insurance companies are subject to country laws, requiring them to register with Nepal Insurance Authority (NIA). As a general rule, you should purchase insurance from companies that are registered and licensed by NIA.
So that if a problem arises, you can count on the support of this department. In fact, to find out which of the companies are licensed in your city, you can contact the department in charge who will be able to give you information about it.
NIA can also help you evaluate the company that is offering you life insurance. What’s more, you can find out if there are complaints against that company by reviewing the databases where claims for benefits requested from insurers are filed, and if complaints or lawsuits have been filed against a specific company.
NIA can tell you whether the company you are considering doing business with has received complaints and how much, compared to the number of policies it sells.
However, these databases cannot guarantee that in the event you claim benefits, your experience will be simple, fast, and as least unpleasant as possible.
Generally, it is more accurate to find out about the proper functioning of any company’s customer service department based on the references you receive from your friends or family. In this case, the personal reference is very important because it is often based on one’s own experience.
- Find the ratings
It is not until the moment of an emergency that the selection of a good policy, a good agent, and, above all, a good company is truly appreciated. The company you select must be financially sound.
You may be sound and healthy for most of the years but suddenly you acquire a serious illness unavailing you to earn for your family. If it happens, you need to claim to the company so you should be sure that the company can aid you financially.
The financial strength of a company dedicated to insurance is a very serious aspect because it is committed to fulfilling a long-term promise to the public.
That is why insurers are rated by independent agencies such as ICRA Nepal or even NIA that evaluate their track record and financial robustness. Consult the ratings of different insurance companies before deciding on one.
You can also ask the insurance company what their rating is and they will surely give you the best grades they have. The important thing is that you receive the proper information from your broker and the company when you request it.
- Savings and Insurance Fund
Life insurance companies make two types of reports: profit and loss accounts, and consolidated income expense accounts. The life insurance company deducts expenses such as insurance fees, claims payments, and income tax from income from investments or loans.
The resulting amount is then referred to as savings and is shown in the consolidated income expense account. Some amount of savings are then transferred to the profit and loss account profit loss account. And the excess amount is transferred to life insurance funds.
Since life insurance companies have to pay the claim after the maturity of the policy, the funds stored in the life insurance fund are used for the purpose. After the actuarial valuation of the company, if the amount is more than the liability, that amount is divided in a ratio of 9 to 1.
The amount of 1 ratio is the profit made by the company, and the amount of 9 ratios is the bonus that you as the insured party will receive. Therefore, you should be aware of the size of the savings and life insurance fund of the company.
- Facilities
The facilities provided by the insurance company are another determining factor when selecting one. You must ensure that the company is easy to reach, especially in cases of crisis or need.
From requesting a quote and purchasing the policy, whether online, by phone, or from an insurance broker, to receiving your documents; you should feel comfortable with all the steps of buying your policy and with the people involved. Make sure the agent or insurance company is easily available in case you need to contact them or file a claim for a loss.
- Customer support
Consumer support must be easily accessible and consultants must always be available in the event of an accident to answer your questions. So it is important to pay attention to the service that the company offers.
The company must also appear trustworthy and its employees helpful, in addition to having a professional and empathetic attitude. You also need to check the speed of response when activating insurance. After all, when you need them, they must be quick to avoid major problems.
Likewise, they must understand your needs and offer the best solutions. About documents, the company must provide complete transparency of information related to the contract clauses, rights, and obligations of the insured, policy, and the insurers analyzed.
- Read the terms
The terms and conditions of the insurance policy are mentioned in the contract which you must read carefully. It happens that companies add conditions in fine print that can reduce the insurance premium or cancel it altogether, and sometimes they hide important information under asterisks. Companies with a high rating usually don’t do this – it’s a blow to their reputation.
Also, the language of the policy should be clear, and concise. And, of course, the policy should not contain general phrases that can have the possibility of different interpretations. Also, the excluded coverage should be clearly mentioned in the policy. And they should not be silent about the terms of compensation for losses.
- Identify the unreliable insurance company
There will always be a telltale sign of unreliable insurance companies that can cause you fraud. The thing is you should be able to identify the signs that can raise red flags. Here are some warning signs of unreliable insurance companies that you should beware of:
- Massive negative reviews, the number of which is increasing exponentially.
- Lack of adequate financial information. If the insurance company has kept its information about assets and financial reserves silent, this is a bad sign.
- Policy prices are too low to be true. Maybe the company is planning to collect funds quickly and disappear.
- Staff turnover. In unreliable companies, they will change their employees regularly in short time. Even the top management staff will also be replaced.
- Claiming process
Verify if the insurance company has paid the claims on time or not. Whether the company is paying out only a small amount, what about payment of a large amount? Are they causing any hassle or delay?
You should gather all this information beforehand by studying the market. For this purpose, you can always check the quarterly financial statement of the life insurance company. In the report, you can examine the insurance company’s remaining claim amount to be paid and claim settlement.
Paying the claim is not the only criterion that you need to analyze. Ensuring how the claims process takes place when a risk occurs is also an important thing you should consider when choosing an insurance company.
If the claiming process is long and complicated, it will be problematic for your desired beneficiary to functionalize the process. Also, inquire whether the company is going to pay in cash or they can make bank deposits or online payments. This can save a lot of time for your family members in times of stress.
In addition, you should also ask for the required documents at the time of claiming. A good insurance company will always be at your service to help you in your ordeals. If the company in any way tries to delay or deny your claim, it’s time that you change your company.
- Company’s performance
Don’t be lazy to check the financial reports of the insurance companies offered. Make sure they have a good performance every year, what is the net profit, how many claims are paid, what are the total assets, etc.
On average, large insurance companies present annual financial reports on their websites or you can ask for help from insurance agents who offer to get financial reports for the past 2-4 years.
Final words
Generally, when we decide to buy life insurance, we don’t give much attention to the insurance company’s ratings and its capital. If the insurance company guarantees its payment and service, we are satisfied. But it is precisely these objective factors that confirm the company’s serious intentions in the market.
They are the ones who speak in favor of the fact that the insurance company will be here for a long time, which means there will be fair payments and decent service. Therefore, always be cautious when choosing an insurance company. The above tips may seem a tedious process to you, but it is important as you are handing over your family’s future. So follow our tips and be safe.