Indians are known to drive a hard bargain before spending money on any purchase. We evaluate the features offered by various retailers and service providers in the same price range before making the final decision. For instance, when we purchase a house, a car or a phone, we do a thorough market analysis before we come to any conclusion.

Similarly, when it comes to purchasing a life insurance policy that requires financial commitment for the long term, it is imperative that we compare the benefits and features offered by different products and ask the right questions to the advisers before taking the final plunge.

An effective insurance plan will help us secure our loved ones and help fulfil their dreams and goals under all circumstances. It will act as an effective safety belt, ensuring our peace of mind and enabling us to focus on our everyday life.

But what are the factors that we must focus on before buying a life insurance plan so that they suit our needs.

While term insurance is universally suitable as a savings product, depending on the current life stage, risk taking ability and future long-term financial goals, it is of utmost importance to know the category of the product we wish to purchase.

To this effect, let us jot down the different parameters that we should consider before we buy a life insurance plan.

Risk appetite

As in most other sectors, a consumer is spoilt for choice when it comes to choosing a life insurance policy.

The ability to take risk for a young individual is far higher than someone nearing retirement. As one size does not fit all, the specific needs of individuals require specific insurance solutions. It is essential to diversify our assets into a mix of traditional and Ulip products to fulfil these individual needs.

Payment options

Life insurance companies offer products where customers are required to make only a one-time payment, that is single premium. Other options include regular premium throughout the term of the policy or for a limited period of time. Knowing the cash outflow can help customers in planning their finances better.

Additional benefits

Unfortunately, everything in our lives can change within seconds. Changing lifestyles and genetic factors is increasing instances of critical illnesses.

Accidental deaths are also on the rise and it is essential to safeguard ourselves and our family from the repercussions of unfortunate events. Hence, it is essential to focus on the additional riders such as critical illness and accidental death benefits while purchasing life insurance products. These riders provide for immediate claim payout providing much required relief.

Fund performance/bonuses

Information regarding where your money will be invested over a long period of time is significant for the buyer.

Traditional life insurance products largely invest in fixed income assets which are less prone to market volatility and offer steady returns over the long term.

Unit-linked insurance plans provide customers the flexibility to choose the investment strategy which best suits their long-term financial goals and their risk appetite. It is worth noting here that a unit-linked policy has a lock-in period of five years.

The fund performances and bonuses can be checked periodically by the customers through the online portals available.

Trust is a non-negotiable element of the life insurance business. Any person thinking about purchasing a policy should first figure out the trust quotient of the insurer.

Moreover, they should evaluate the customer service indicators such as claim settlement ratio, which is the number of claims settled by the insurer versus those received by them in a given financial year, along with consistency of the claim settlement ratio for the past few years.

Not limiting yourself to just this, you should dig deeper and compare the claim settlement experience — what is the turnaround time when it comes to settling death or maturity claims and whether the process is smooth and hassle-free.

Buying a life insurance policy is an important financial decision that requires due consideration before making the final decision. The above questions mentioned in the article are the essential ones and obtaining answers to these questions will ensure that you have made an informed choice while purchasing life insurance for the security of your loved ones.

The writer is chief distribution officer, ICICI Prudential Life Insurance Company