Procedures & Terminologies to Understand While Applying for Life Insurance
You have made up your mind to include life insurance in your investment portfolio. You want to now go ahead and apply for life insurance but are unsure of how to buy a life insurance policy. Who should you speak to or what should you do next? Most net savvy people will immediately log online and compare on policy aggregator sites or go straight to the insurer’s site to understand the life insurance application procedure.
Buying an insurance policy has never been as easy as it is now. Some of the channels to sign up for a life insurance policy are listed below:
a) Online-On the Insurer’s Site
b) Online-On a Policy Aggregator’s Site
c) The nearest branch of the insurance company
d) The nearest branch of a bank with which the insurance company has a tie-up (commonly called bancassurance channel)
e) The Insurance Advisor
Some Insurance Terminologies to Understand While Applying for Life Insurance Policy
Sum Assured
Sum Assured (SA) is the guaranteed, fixed, lump sum amount payable to your nominee in case of your demise. SA is also used in endowment plans to indicate the guaranteed, fixed, lump sum amount payable to you on the maturity of the policy.
Nominee
The person named, by you, to receive the SA and/or Funds from your investment in case of your demise. Riders
A feature in a life insurance policy that either provides additional coverage or add-on benefits/
Bonus
The profit made by insurance companies, by investing the premiums in bonds/debt instruments, is distributed amongst policyholders. Surrender Value
The amount receivable if you decide to exit the policy before the maturity date. Surrendering is possible only after the lock-in period if any.
How to Buy the Best Life Insurance Policy Online?
1. Select a Plan
With a plethora of options available within life insurance, you must explore and find the one that meets your requirement and expectation. If you are looking for a pure life protection plan that gives a fixed lumpsum amount to your family/nominee on your demise, term insurance is ideal. iSelect Smart360 Term Plan offered by Canara HSBC Life Insurance Company is a comprehensive term plan that can cover even your spouse, return all premiums if you outlive the policy term and allow you to increase the Sum Assured depending on life stages and affordability.
If you are concerned about your post-retired life, you must explore pension plans and wealth preservation techniques alongside growth. GuaranteedIncome4Life and Guaranteed Savings Plan pay out fixed cash flows after investing for defined payment terms.
The undisputable option for wealth creation is Invest 4G that allows you to automatically rebalance your portfolio depending on your pre-defined equity: debt allocation. You can also systematically transfer funds from one to another so that you benefit from the bull runs and conserve capital during a bear market.
2. Select Investment Amount or Sum Assured
For a term insurance plan, the Sum Assured should be at least 10-15 times your annual income. The logic is simple. 15 times your income will give your family a financial cushion for several years by when either the kids grow up and/or your spouse figures out an alternative way to generate supplementary income.
Sum Assured in Life Insurance | How to Choose the Right Sum Assured
If you are saving for retirement, keep at least 20% of your current income aside and invest in aggressive growth plans such as Invest 4G or deferred annuities that can give you and your spouse, Pension4Life.
3. Fill the Application Form
This is a very crucial step because the details filled in here would be closely scrutinized. Being honest, upfront and transparent is essential to avoid any rejection of claims in future. The form asks for basic details of health, travel, habits (smoking, alcohol consumption) and income. In case you already have minor ailments such as hypertension and cholesterol, you may be asked to submit specific questionnaires of the same. Income documents are quintessential for term plans and medical check-ups will almost certainly be triggered if you are above 35 and/or have hypertension or other ailments.
4. Pay the Premium
Your application will not be processed until you pay the premium. You can opt for a frequency of your choice and pay the proportionate amount. If you opt for monthly frequency, some insurers may insist on you paying 2-3 advance premiums at the time of signing up. Check the terms, decide on the frequency and pay up.
5. Appear for Medical
Medical tests are triggered in specific instances, albeit, there is a possibility of anyone being randomly recommended for a medical test before processing the application further. The following instances have a higher probability of being recommended for a medical check-up:
i. You are over 35 years of age
ii. You have a history of some illness
iii. You are on medication for some ailment
iv. You have hypertension or diabetes or cholesterol
v. You have applied for a Sum Assured of more than Rs.25lakhs (or any such threshold amount)
The charges for undergoing the medical tests are borne by the insurer, although, in some cases, the applicant may be asked to bear the same.
6. Revised Premium/Sum Assured
Based on your risk assessment and medical test reports, you may be offered a lower Sum Assured or a higher premium. If you accept, your application will be processed further.
7. Policy Issued
Congratulations! You get the policy at this stage and still have a 15-days freelook period to return the policy. However, do look through the document carefully for any errors in your name and other personal details. Also, check the nominee details to ensure the correct name and contact information is mentioned there.
Buying a life insurance policy has not been simpler at any point earlier. The procedure is simple. If you are not comfortable with technology, there are multiple offline channels to know more about the options available. The staff at the branch, your insurance advisor or even the online customer support staff can help you seamlessly navigate the process.