How To Pick Insurance Plan?

With numerous insurance products making their presence felt in market through sales promotions and sales agents, you as a consumer are bound to get baffled by the number of choices being offered to you. A decision to pick an insurance policy can be made easy with the knowledge of the pertinent fields that affect the choice of insurance products, throughout industry.

An insurance product has various comparable factors that need to be looked at while making a purchase decision. Let’s look at them one by one:

1. Flexibility in Sum Assured

Since insurance is the only protection vehicle, make sure that your insurance policy covers you adequately. If you have bought or are planning to buy a ULIP, it is good to let the policy cover you adequately and invest the rest of premium in the fund of your choice. It is advisable to not compromise your and your family’s protection in the aspiration to earn higher returns.

Make sure you take an insurance policy as a protection cover first and then treat it as an investment vehicle, if you are not covered with any other protection plan.

Here, the higher sum assured multiple factors mean more choices for consumers to opt the sum assured of their choice.

2. Claims settlement ratio and grievance data

To find out how many claims the insurance company has settled out of every 100 claims reported to the company, use the information provided in the claims settlement section. The highest claim settlement ratio depicts that the company has settled maximum number of claims. The best performers in regard to claims settlement ratio for year ended March 2011 are:

Here, it is also important to be informed about the status of claims, which are still open and the length of these claims, in terms of time. This data is calculated on quarterly basis by every insurance company and is featured in its public disclosures.

In addition, the number of complaints that the company has received and the number which were solved, out of total open complaints. More number of open complaints for more than 15 days shows weaker grievance system of the company.

Following are the best performers in regard to grievance redressal for year ended March 2011

3. Sum Assured per Rs 1,000 of premium paid

Sum assured is fixed in terms of multiples of the annual premium you have paid. According to the latest IRDA guidelines for ULIPs, a higher of 10 times of the annualized premiums or 0.5 x policy term x annualized premium has to be fixed as the sum assured.  However, some companies fix their sum assured as much as 40 times of the annual premium paid. Go in for policies that offer higher sum assured for comparatively lower premium as they prove cost-effective is terms of providing protection cover.

Following are the best performers as regards to highest sum assured per Rs 1000 of premium paid for year ended March 2011:

4. Rider options for additional protection at low cost

Riders are additional benefits (covers), provided at lower premium. For instance, accidental death rider provides an additional sum assured, which can go up to basic sum assured, in case of accidental death. Similarly, waiver of premium benefit rider lets your policy continue even in case of death/ disability, by waiving off premiums and letting the fund value (in case of ULIPs) remain invested till maturity.

Here, it is important to check the additional riders available with the policy, as the maximum number of riders ensure better coverage in untoward incidences, making riders a point of comparison.

5. Exclusions and Coverage

Here, exclusions are the events where your family would not get any death benefits if any of the excluded events are the cause of your death. For example, terrorist attacks, swine flu or AIDS. Policies differ hugely on the parameters of covers and exclusions. It is always good to check whether sensitive events have been adequately covered or not so that your family is not in for tearful surprises later.

Before zeroing in on any insurance policy, it is also pertinent for potential buyers to have a look at the coverage and exclusions of the policy, so that he/ she will be able to select the policy that suits best.

6. Paper Work

Once you have zeroed in on the insurance policy of your choice, the work does not stop there. To ensure the smooth and speedy claim settlement, right allocation of insurance policy, etc. it is important to fill the form correctly with complete information and all required proofs.

Here, one needs to make sure of not stating any wrong information and/ or hiding information related to health and otherwise. Giving a true picture may end up in a higher premium but hiding facts would have your claim rejected, when you need it most.  

It is advisable to fill the application form yourself and keep a copy of it and other supporting documents. Medical ‘tests should be done on your account, even if not required by the insurance company, for a proof on later date, if required.

Once you know what you want, it is worthless to get caught in insurance terminology. Take confident buying decision by comparing products on the list of above mentioned parameters. Also, you must get clarifications from sales people, if something is not clear from the brochure and other marketing material.