Five Points to Consider Before Investing in Insurance Plan

You should be little cautious before investing in insurance plan. There are scores of insurance companies who are selling their insurance products day and night to the individuals and in such situation where plethora of insurance products are there in the market, buying the right insurance policy is one of the most important investment decisions for every individual, which should meet your requirements as well.

Various insurance products covers two vital aspects – the risks associated with our life and our property such as land/house and vehicles which comes under Life insurance and General insurance respectively.

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It happens most of the time that we buy an insurance plan through our colleagues, friends and other well-wishers without knowing the intricacies of the policy. Once the policy is bought and after some time it does not suit your requirements then you try to cancel or surrender your policy resulting loss in your invested money. Hence, it makes sense first to do your own due diligence and then invest your hard-earned money in the right insurance policy.

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To make it even simpler for you, we have listed below the top 5 points you need to carefully consider before investing your money in an insurance plan.

1. Draw your financial roadmap and set target

Investment decision should be taken with a proper roadmap including your entire financial situation if it is your first investment on insurance or any other long term investment or you already possess other insurance policies. Investment goals and risk tolerance should be figure out before investing.

2. Before investing on any insurance policy, do a background check

Extensive background check on the insurance companies on your list should be done before the investment on the insurance made. You should know the network & distribution structure, policy offerings & details, customer support contact details and assistance for online investments listed on their website.

3. Create and maintain an emergency fund before investment

Sudden investments should not be done rather you should maintain some emergency funds before any kind of investment. Such emergency funds can be maintained in a savings product or other short time recurring or fixed deposits to cover an emergency such as sudden unemployment. At least six months of income should be maintained in savings so that it may be used in need.

4. An informed decision is always better

You should know the insurance products such as ULIPS (Unit-Linked insurance Plans) – a combination of life insurance and investment plans, Pure Term Insurance Plans – to protect your liabilities in the long-term and Endowment Plans – that offer guaranteed returns for investors with a low risk appetite. Always check the performance of the fund you are interested to invest in such as ULIP (Unit-Linked insurance Plan). All this information is available in fund’s website online. As a suggestion, always choose a stable fund with a consistent track record of growth and assured returns.

5. Check the Lock-in Period and claim settlement process

Always check the lock in period of the investment policies with the surrender value (when policy is surrendered before the maturity after lock-in period) before making any kind of investment. Only oral commitment from the insurance agent is not sufficient rather a well documentation regarding the same should be there, if it is available online then take a printout keep it with you with the fund/policy papers. You should keep your policy papers with safety as they would be required at the time of claim settlement or at the time of maturity. Since the Indian insurance industry is highly regulated, yet you can check the claim settlement ratio of the company from IRDA (irdai[dot]gov[dot]in/Defaulthome[dot]aspx?page=H1) website.

Conclusion

Above points one should remember before investing in insurance plan or policy or any other investments you are planning. You should also care for the other benefits which insurance company is providing to the policyholder though it may differ from company to company. While every insurance policy provides the standard protection against loss of life/property, many also offer several additional benefits such as top-ups and extra bonuses as well. As a pre-caution, always invest in the policy/fund which is regulated and licensed by IRDA (Insurance Regulatory and Development Authority).

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