There is Beginner’s Guide to Buying Insurance that Must Read!. An umpteen number of policies to choose from. Because we cannot foresee our future and stop unpleasant things from happening, having an insurance cover is a necessity. But you need to choose carefully. Don’t simply go with what the agent tells you. Read policy documents to know what is covered, what features are offered and what events are excluded from being insured.
1. Know your Needs
Determine what asset or incident must be protected against loss/damage. Is it your life, health, vehicle, home? Next, determine what kind of damage or danger exactly would the assets be most probably be exposed to. This will tell you what features you should be looking for in a policy. Of course, there will be losses which cannot be foreseen and the cost of dealing with them can be very high. For instance, nobody can predict that they’ll never suffer from critical illnesses no matter if they’re perfectly healthy at present.
The biggest mistake, while it comes to buying insurance, particularly life insurance, is to view it as an investment. Clubbing insurance and investment in a single product is a poor idea. You lose out on both fronts because for the premiums you’re paying more cover could’ve been got in a term plan and if the premiums were invested in better instruments your returns could’ve been several times more.
Be wary of agents who want to talk you into buying unnecessary policies like child life insurance, credit card insurance, unemployment insurance and so on. Instead of buying separate insurance for specific assets or incidents look for policies that cover a host of possible events under the same cover. Whenever possible choose riders that make sense instead of buying them separately. Unless there is a fair chance of an event happening you do not need insurance for it. For instance, unless you are very prone to accidents and disability due to your nature of work or other reasons you do not need an Accident Insurance policy. A good Life Insurance policy with accidental death rider or waiver of a premium rider or a disability income rider will do the job.
2. Understand Product Features and Charges
The worst way of choosing an insurance product or insurer is to blindly follow the recommendation of an agent or a friend. The good way to do it is to shop around for products that suit your need and filter out the ones offering lower premiums for similar terms like age, amount of cover, etc. All details you need about the product features and charges will be provided on the company’s website. Many insurance policies can now be bought online. Buying online is smarter because premiums are lower due to the elimination of agent fees. If buying offline in case of life insurance, tell the agent that you’re interested only in term insurance.
Before you sign the contract make sure you have understood what items are covered and what items are exempted from the cover. It would be so devastating to learn in the event of damage or loss that the item you hoped to cover with the insurance was actually excluded. So many people rush to their insurers after being treated for diseases only to realize that the particular disease was excluded. Understand details like when the cover begins and ends and how claims can be filed and losses to be reported.
Don’t choose an insurance company because your neighborhood friend is their agent and never let them coax you into buying from them. Insurance premiums run for years and it means a sizeable amount of money. Apart from the premiums charged look for the service provided. When you are faced with a peril you want the claims collection processed to be complicated with non-cooperating staff in the insurance company’s office. Seek answers from people who have had previous experience with the company for questions like how customer friendly and responsive the company is when it comes to handling claims.
3. Evaluate and Upgrade in Time
As you walk from one life stage to another or when the asset insured changes your policies must be reviewed. Perhaps your cover will need to be increased (or decreased) or you’ll need to top it up with a rider. Some instances when you need to review your cover are when you get married, when you have children, when your income increases your decreases substantially, when you’re buying a house/car and when you’re responsible for your ageing parents.