Before you plan to buy life insurance to secure your family’s future, you need to know the procedures and terminologies involved in applying for one. This article will help you get the basics of life insurance and guide you through the steps of getting a suitable policy.
Life insurance is a contract between you and an insurance company, where you pay a fixed amount of money (called a premium) regularly. The company promises to pay a lump sum amount (called death benefit) to your nominee (the person you choose to receive the money) in case of your death during the policy term (the duration of the contract). Your nominee can use the death benefit to meet their financial needs and obligations.
Key Insurance Terminologies
Before you apply for a life insurance policy, you should know some essential terms and concepts related to it. Here are some of them:
- Sum assured: This is the amount of money the insurance company promises to give to the beneficiary if you pass away. It is also used to calculate the premium amount you have to pay. The more the sum assured, the more premium you will have to pay for your insurance. So, it is essential to pick an amount that can cover your family’s needs and debts if you are not around anymore.
- Riders: These are added benefits that you can include with your standard insurance policy to increase your coverage. For instance, you can attach a critical illness add-on, giving you a one-time payment if you are diagnosed with a specific severe illness. These add-ons do cost extra money and have specific rules and requirements.
- Grace period: This is the period after the premium payment due date. During this period, you can still make the payment without facing any penalties or the risk of your policy lapsing. The grace period is normally 15 days for monthly payments and 30 days for other payment modes.
- Lapse: This is the status of your policy when you fail to pay your premium within the grace period. A lapsed policy will not provide any coverage or benefits to you or your nominee. You can restore a lapsed coverage by paying the due premiums along with interest and fulfilling other requirements within a specified period.
- Surrender: This is the option of terminating your policy before the end of the policy term and getting back a portion of your paid premiums (called surrender value). The surrender value depends on the type of policy, the duration of the policy, and the premiums paid. You will lose the coverage and benefits of your policy if you surrender it.
- Free look period: This is the time period after you receive your policy document, during which you can review the terms and conditions of your policy and return it if you are not satisfied with it. The free look period is usually 15 days starting from when you receive the policy document. You will get back your paid premiums minus some charges if you cancel your policy within the free look period.
Procedure for Buying a Life Insurance Plan
Here are the steps involved when you decide to buy life insurance.
Step 1: Choose a suitable policy
You should do some research and comparison before you select a policy that meets your requirements and expectations. Use the life insurance premium calculator for quote assessment.
Step 2: Fill up the application form
You will have to fill up an application form with your personal, professional, and financial details. You will also have to declare your health status and medical history. You should be honest and accurate while filling out the form.
Step 3: Submit the documents
Some of the common documents required are a PAN card, Aadhaar card, passport, driver’s license, bank statement, salary slip, etc. You should keep the originals and photocopies of these documents handy while applying for a policy.
Step 4: Undergo medical tests
Depending on your age, sum assured, and health status, you may have to undergo some medical tests to assess your risk profile. The insurance company will arrange for the tests at a nearby clinic or hospital. You will have to bear the cost of the tests, which will be reimbursed if your policy is issued. You should follow the instructions given by the medical staff and avoid any habits or activities that can affect your test results.
After you submit your application form, documents, and medical reports, the insurance company will evaluate your risk and decide whether to accept or reject your proposal. This process is called underwriting. Next, pay the premium and receive the policy document.
Conclusion
Once you understand the jargon and complete the above steps, you have successfully applied for a life insurance policy. You should keep your policy document and premium receipts safe and inform your nominee about your policy. You should also pay your premiums regularly and on time to keep your policy active and enjoy its benefits. You should also review your policy periodically and make changes if required to suit your changing needs and goals.
