How to choose an LIC policy in India

LIC Policy: Why should you be very serious about it?

I still remember those days how my close friend suffered to close the huge debt his father had left behind after his death.

If his father had been more financially aware, and had considered the worst case of not being alive; his heir (my friend) wouldn’t have suffered both emotionally and financially.

Friends, I’m not triggering negative vibes here, but I’m trying to tell you to consider a case of what happens to your loved ones when you aren’t alive. And I hope, this post would help you to find a solution for that!.

The Basics

Simple Formula: If you have = financial dependents, then buy life insurance policy; else don’t buy

Life insurance makes sense only if you’ve financial dependents. Do not blindly believe the common myth that getting an LIC policy is a great investment. If you want to invest your money, invest in other financial investment tools like Fixed deposits, PPF or NSC to grow it more.

Here is a simple story which tells you why a life insurance is necessary when you’ve financial dependents

A slightly detailed level of estimate could be got by the following formula

Maturity or Sum Assured (SA) = (Total yearly expenses x 2 + Total amount of all your liabilities) – Total amount of all your Assets.

Tenure = Total number of years your dependents are dependent on you

Beneficiary or Nominee = The dependent or the person who could responsibly take care of dependent when you aren’t alive (Eg: wife)

With the good estimate of your Sum Assured (SA), Tenure and Nominee, you would be able to clearly sort out which policy is a right choice. Do a detailed research over the internet by reading reviews about the insurance policies.

Note: The video helps you to come up with an idea to estimate. A very detailed estimate could be given by experts only.

Now, what happens if you can’t continue with the Policy?

Yes, it could be cancelled or Paid up!

Cancelling before 3 yrs? You get 30% of the premiums paid (excluding first year premium).

Cancelling between 4 to 6 years? You get 80% of your paid premiums will be back (excluding first year premium)

Cancelling after 6 years? You get 90% of premiums (excluding first year premium)

Paid up: An Alternative Option to Cancelling

There is an alternate option here called ‘Paid up’ – pay all the premiums for the first 3 years and stop paying for the rest of your term or tenure. You’ll get all the premiums at the end of tenure, this way you won’t lose your money but had to wait for the rest of the term to get the sum

Things that you should do it by Yourself!

Flip and Read the Policy’s Terms and Conditions

Friends, always have the habit of reading the terms and conditions – you need not want to run behind your agent to know the valuable piece of information that you already have in hand.

Fill in the form by yourself!

Many claims are rejected because of the false information entered in the forms. This is because the form are being filled by the agents.

Entering nominee name isn’t a formality, it’s a serious thing!

Your loved shouldn’t be running behind someone else to claim your hard earned money when you aren’t alive. So make sure that the right dependent name is added to the policy. And please don’t be dependent on your agent to fill this, they won’t know how much you care for your loved one,  they might take this lightly and fill in with their own assumptions.

Get your Online Payment Facility Enabled!

“I personally had a bad experience with an LIC agent – I had been paying premiums to her, but had not taken pains to get the receipt from her. She took that as an advantage and hadn’t paid a couple of premiums. Mind you, I’m not telling that all agents are bad, but some are” 

So, I would strongly recommend online payments so that you could track premium payment receipts!

Related: 2 Wise Options to Invest with little money in India

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