Precautions Before Buying Insurance Policy

Saving tax through life insurance is a very popular option and most of people’s tax saved money goes into life insurance premium. Investors benefit is not the basic reason of this popularity but the attractive advertisements and hefty commission earned by the agents is the prime reason. If you minutely look at the policies you have purchased then you’ll find that although you have saved taxes but neither earned good return nor the financial security. That is why you should choose optimal insurance policy for saving the taxes.

Stay away from investment plans – Endowment plans and other plans like home life, money back, child and ULIP fall under this category. Basic objective while choosing these investment plans are the cover and returns whereas in case of life insurance the ultimate goal is the financial security of your family in case of your death.

Less Returns – Normally in such plans you get 5-6% returns annually. But with rising inflation meeting your life’s goal is very difficult. Therefore we need to investment in products which can beat inflation rate.

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Less Life Cover – Normally you get cover which is 10-20% of the annual premium due to which we cannot take excess insurance cover. For example, if a person wants to buy insurance cover of 25 Lacs then he will have to pay annual premium of 1.5 to 2 lacs. On the other hand, for a person aged 30 with term plan of 25 Lacs will have to pay annual premium of just INR 5000 through term plan. Therefore you should buy term plan if your need is large insurance cover.

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