Why Most Indians End up Buying Insurance the Wrong Way?

 

Just like a business or property, humans too are exposed to various kinds of risks. Insurance is a financial tool that helps to be prepared for losses caused by such risks.

Insurance plans offer security against various mishaps. It provides peace of mind knowing that your financial burdens will be taken care of, even in case of an unfortunate event. Investing in insurance plans generates financial resources and encourages saving habits. Premiums paid towards insurance policies also provide tax benefits. Due to such widespread advantages, individuals are now investing in insurance plans more than ever.

But, it is important to buy an insurance plan correctly. Let's find out how to do this.

How much should you be insured for?

It is imperative to determine the coverage you need. For this, you need to take numerous aspects into consideration. These include your income, the earnings of your family members, your assets, liabilities, and your current financial position, besides many other things. Ask yourself how much will your family need to meet their day-to-day expenses as well as fulfill other financial obligations when you are not around. The insurance plan you take should suffice their expenses and obligations.

For instance, your friend is deciding the amount of term insurance. Firstly, he needs to estimate his immediate needs such as medical expenses, debts, credit card payments, retirement needs, and emergency funds, besides others. He then needs to calculate his current assets, which include bank savings, investments, existing term insurance, and value of existing property. The difference between his family needs and his available assets is the amount of cover required.

While deciding the quantum of insurance required, consider your present age, too. Premiums payable are directly proportionate to your age. Another important aspect to consider is the level of inflation. You have to think about the future fall in the purchasing power of rupee. If the amount remains the same, it will not offset the fall in the purchasing power of rupee. Therefore, opt for an insurance plan providing a higher coverage.

Basic principle of buying insurance

Many make the mistake of buying insurance for the sole purpose of investment. The basic principle of insurance is to separate your investment needs and insurance needs. Buy term insurance, which is also known as pure insurance. Insurance agents promote other types of insurance stating that you get back the premiums paid along with a return. However, pure insurance plans come with their own set of benefits. They provide higher death benefits, which may be used to meet the financial needs of your near and dear ones. They also give you the peace of mind, knowing that your family's needs will be taken care of even in your absence.

If you are looking for the best term insurance plans in the market, consider policies offered by HDFC Life such as HDFC Life Click 2 Protect 3D Plus, HDFC Life Click 2 Protect Plus, and Click 2 Protect Health. Such pure insurance plans offer financial stability and complete protection to your loved ones even in your absence. Compare the features and benefits of these plans and buy the term insurance policy best-suited to your needs.

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