Deepa Gopalan
ET Intelligence Group

How do you choose the best insurance policy?

ALL of us, at some point or the other, have had a close encounter with insurance agents. And most of the agents try to tell us about lifestage planning and need-based planning with respect to life insurance. Most companies have developed products that are intended to suit you at every stage of your life.

There are endowment policies to help build up your investments, money back policies to give you regular returns, retirement solutions to help you save for life after retirement, children’s policies to save for your child’s future and a whole lot more. More the choices, more is the confusion in deciding what policy to opt for, for only a life cover. ‘Life cover’ is nothing but the main aim of insurance – to provide financial security to your family in case of your unfortunate death.

So more the choices, more is the confusion in deciding what policy to opt for, for only a life cover. You ask this question to an agent and he will tell you to take a policy that gives you a life cover plus an accident benefit rider plus an investment option plus periodic returns, leaving you wondering what you really needed.

If you are looking for a pure life cover policy — no frills attached — the answer is very simple: Term insurance policy. This policy is the largest selling policy in the world, simply because it is cheap and serves the basic purpose of covering your life. In this policy, one will have to choose a term for which one wants to buy the insurance cover and also the amount of life cover.

A premium would be charged according to the term chosen, amount of life cover and the age of the policyholder. Premium is the price you pay to buy the policy — an amount that is paid annually, semi-annually or quarterly to the insurance company throughout the term chosen. Now, if the policyholder dies during this term, his nominees would get the sum assured, that is amount of life cover.