The purpose of life insurance is to ensure that you and your family have a financial safety net in place - in the face of life's unexpected storms. Should you pass away, the insurance company provides a sum of money for your family. This money can help them stay afloat and protect them from any financial hardships that may arise.
Life insurance not only provides your family with financial security, but it will also empower you to reach important milestones such as saving for retirement, educating your children, planning for their wedding, etc. So, it is an important part of financial planning and should be considered a necessity for anyone with financial responsibilities.
But, how do you buy life insurance? Is it a tedious task?
Years ago, purchasing life insurance meant standing in long queues and going to the insurer's office multiple times. With the emergence of online services, you can purchase any plan in a few clicks. This streamlined approach allows you to obtain the life insurance coverage you need quickly and easily - so there's no excuse to put off the purchase any longer.
In this article, we'll walk you through the steps of purchasing life insurance online. Let’s see!
How Do You Buy Life Insurance Online?
Buying life insurance online is easy and simple. Here is a step-by-step guide -
Choose The Right Policy Type
Whenever you visit the website of any life insurance company, you will find a variety of life insurance products. You can select the product based on your and your family’s goals and needs. Choose the policy carefully, as it will have a significant impact on your and your family's financial stability.
Fill In The Basic Details
Once you've selected the plan, you'll need to enter a few personal details to receive a premium quote. Fill in your name, age, gender, email address, mobile number, and pin code. You may need to enter other details as well including occupation, education, income, or lifestyle habits, such as smoking habits. After you fill out all the required details, you'll receive a quote for the life insurance premium. Ensure that all information provided is correct to get the most accurate quote possible.
Decide On The Cover/Maturity Amount
In the next step, you need to decide how much cover you want to purchase. Many websites will have a default coverage amount - which can be changed based on your preferences and requirements.
It is essential to choose the right amount that should be sufficient to achieve the goal or purpose for which you are buying the life insurance policy. This ensures that you and your family are adequately protected - no matter what the future holds.
For instance, in the case of a term insurance policy, you should choose a cover amount sufficient to support your family financially in your absence. And, in case you wish to buy child life insurance to save for your child's higher education, you will need to estimate the amount your child will require, factor in inflation, and then select a cover amount.
Customise Your Policy
You can customise your life insurance policy based on your preferences through various customisation options. Make the most of these customisation options to ensure your policy is tailored to meet your exact needs. Depending on the product and insurer, the options may vary.
Here’s how you can customise your policy -
? Pick Your Desired Policy Term
The policy term is the period of time during which you will be covered by the insurance company. If you buy life insurance for a particular purpose, you will have to choose the policy term accordingly. For example, if you're buying life insurance to cover your loan repayment, you'll need to choose a policy term that matches the length of the loan.
? Select The Premium Payment Term
The premium payment term is the period during which you are required to pay your premiums. You can either pay your premiums for the duration of your policy, or you can pay them for a shorter period. Depending on your preference, you can select a payment term that will work best for you.
In general, most insurance companies offer three payment terms -
Regular Pay Option
In this case, the duration of the premium payment will be equal to the duration of the policy. Salaried individuals with a steady stream of income, etc. can choose this option.
For example, Mona buys term insurance with a sum assured of Rs 1 Crore and a policy duration of 30 years. She chooses the regular pay option, so her premium payment duration will be 30 years. This means that she needs to pay premiums over this 30-year period.
Limited Pay Option
By choosing this option, you can finish your premium liability in fewer years than the policy term. You can pay your premiums in faster and larger instalments and still enjoy insurance coverage throughout the policy term. If you foresee irregular income in the future, you can opt for this option. Some of the limited pay options include 5-pay, 10-pay, 15-pay, 20-pay etc.
Let’s take Mona’s example again. If she goes for the limited pay option and chooses the 15-pay premium payment term option, she can finish off her premium payments within 15 years and enjoy coverage for the remaining policy period.
Single Pay Option
This option requires you to pay the entire premium as a lump sum in one go when you purchase the policy.
Let’s recall Mona’s example. If she goes for the single pay premium payment option, she needs to pay the entire premium at the time of policy purchase and will remain covered for the entire policy period.
? Choose The Premium Payment Frequency
You can customise how often you want to pay your life insurance premiums. By selecting your preferred payment frequency, you can enjoy the convenience of tailored premium payments that fit your budget. There are four options to choose from - yearly, half-yearly, quarterly, and monthly.
? Opt For The Increasing Cover Feature
Your responsibilities will increase as you age. You must stay ahead of the curve and make sure that your insurance coverage keeps pace with your growing needs. The increasing cover feature helps you with just that. Your coverage will increase gradually by a specific percentage until a maximum limit is reached.
You should consider increasing cover if -
You are not eligible to obtain the cover amount that you desire, or
You wish to protect your life insurance cover amount against inflation.
Some life insurance plans allow you to increase the payout you will receive in the future. Payouts can be enhanced by a certain percentage, such as 5%, 10%, etc.
? Choose The Benefit/ Claim Payout Option
You can also choose how you want your family to receive your death benefit if you pass away while your policy is active or if you want to receive the maturity benefit if you survive the policy period. Depending on the type of policy you buy and the insurance company you purchase from, the benefit payout or claim payout option may vary.
Here are some common payout options
Lump-sum Payout Option
This option allows you or your family to receive the entire benefit or claim amount in one go. Choosing this option is ideal if you have debts or unpaid liabilities. This lump sum can be used to pay off outstanding debts or obligations.
Monthly Income Payout Option
The insurance company will pay the benefit or claim amount in monthly instalments for a certain number of years. This money can be used to cover everyday expenses like school fees, grocery bills, and other monthly expenditures.
Lump-sum With Monthly Income Payout Option
This is a combination of the above two options. The insurance company will pay a part of the claim as a lump sum in one go if you choose this option. The remaining claim amount will be paid out in monthly instalments for a specified period of time. The lump sum can be used to repay any outstanding loans and the monthly payout can cover everyday expenses.
Pick Necessary Riders
You can add riders to your base life insurance policy to extend its coverage. Riders are optional benefits that provide additional payouts if a specific event occurs. Depending on the life insurance policy and insurance company you select, you may be able to choose from a variety of riders.
Some of the common riders include -
⟶ Critical Illness Rider
⟶ Accidental Death Benefit Rider
⟶ Accidental Disability Rider
⟶ Waiver of Premium due to Critical Illness Rider
⟶ Waiver of Premium due to Accidental Disability Rider
⟶ Surgical Care Rider
⟶ Hospital Care Rider
This is just an indicative list. There may be more riders.
For example, if you opt for a critical illness rider, it will pay you an additional payout if you get diagnosed with a listed critical illness in the policy document.
Examine The Benefit Illustration
Before you pay the premium, you will receive a document called a benefit illustration from the insurance company. In this document, you will find a detailed description of aspects like -
⟶ Features, riders, etc. you will be purchasing.
⟶Guaranteed, non-guaranteed benefits, loyalty and guaranteed additions (if any), and the death and maturity benefits the insurance company will pay.
⟶ How the life insurance premium is invested, how the insurance company will deduct
charges, and how the fund value grows over time.
⟶ The value of every metric for every year, as well as how your money will grow every year.
Make sure you carefully review the benefit illustration after receiving it from the insurance company. This will allow you to see how the money you invest will perform over the entire term of the policy. Once you have reviewed the illustration, take the time to discuss it with your financial advisor to gain a better understanding of the policy's performance.
Insurance companies provide you with the option of downloading the benefit illustration or sending the PDF directly to you after you select customizations. This allows you to gain access to your benefit illustration quickly and efficiently. In the event that you do not see the option to download it on the website or the insurance company does not email it to you, you can contact the insurance company for the same.
Proceed With The Application Process
Once you have a thorough understanding of the plan's benefit illustration, you can confidently move forward with your application. In this step, you enter your information on the insurer’s website. You'll be asked to provide personal details, lifestyle information, and medical information.
? Personal Details:
Name, mobile number, email ID, income, education qualification, occupation, temporary and permanent address, etc.
? Lifestyle-related Details:
Your habits, such as drinking, smoking habits, drugs/narcotic usage, etc. When it comes to drinking and smoking, the insurance company will want to know the specifics. In the event that you smoke, the insurance company will want to know how many cigarettes you smoke per day. In case you have a drinking habit, you will need to tell the insurance company what type of alcohol you consume and how much you drink per day or per week, etc.
? Medical Details:
You will also need to provide your health status to the insurance company. This is an important step in the process and will help the company evaluate your risk profile. You will be asked to disclose details about your medical history, ailments, diseases, medical conditions, surgeries or treatments you have had, and so on. A basic set of body measurements may be asked, such as your height, weight, blood pressure, etc.
? Other Details: These include -
1. Nominee Details
The nominee is the person who will receive your life insurance claim amount if you pass away while the policy is in force. It is important to ensure that the nominee is someone you trust and who is aware of their responsibilities in the case of such a tragedy. Your nominee can be any member of your family, such as your spouse, children, parents, siblings, etc. So, you will have to provide all the details about your nominee as well.
2. Participation In Adventurous Activities
In the world of adventure sports, activities such as bungee jumping, skydiving, paragliding, mountaineering, rock climbing, scuba diving, river rafting, etc. are regarded as very risky. It is therefore important that you tell your insurance company if you have participated in or intend to participate in such an activity.
3. Travelling Plans
Insurers may also want to know whether you plan on travelling out of India any time soon.
4. Covid-19 Details
Some insurance companies may ask you to provide information about the date on which you were vaccinated against Covid-19 including both doses. It is important to keep records of your vaccination status so you can provide accurate information to your insurance company. They may also ask you if you were diagnosed with or had symptoms of Covid-19 in the past, or if any members of your family were affected by it.
Note: This is just an indicative list. You should know that each insurance company will have a unique application process and proposal form based on what type of policy you choose.
Submit The Requested Documents
In order to support your application, the insurance company will require some documentation, like -
⟶ KYC documents like passport, Aadhar Card, PAN card, voting card, etc.
⟶ Income proof documents including salary slips of the last 3 months, Employer's Certificate, Income Tax Returns, Form 16, etc
Make The Premium Payment
Once you provide all the information required by the insurance company, they will ask you to pay the first premium. Several factors will influence the premium you have to pay, including:
⟶ Age, gender, health, lifestyle habits, etc.
⟶ The cover amount you choose.
⟶ The policy duration you choose.
⟶ The premium paying option such as limited pay, regular pay, or single pay.
⟶ The riders you opt for, etc.
Some insurance companies' websites offer e-SI (electronic standing instruction) options at this step. If you pick this option, your premiums will be paid directly to the insurance company on every due date. This eliminates the need for manual payments, making it easier to stay on top of your policy's premiums.
✏️ Things To Note -
1. Life insurance premiums are determined by different factors depending on the type of policy.
2. Some insurance providers may ask you to make the premium payment before you begin the
application process, while others may ask you to pay it after you finish the application and documentation process - depending on the product and the insurer.
Undergo Medical Tests
The insurance company may ask you to take a series of medical tests based on your declarations in the proposal form, your medical history, your family's medical history, the type of policy, and the cover amount you select.
Some tests you may need to undergo -
⟶ Basic tests like a Treadmill Test (TMT)
⟶ Blood test to determine whether you have any potential health problems, like diabetes, cholesterol, low haemoglobin, heart disease, etc.
⟶ Drug tests to determine whether you take drugs, smoke, or drink alcohol.
⟶ Other tests like HIV tests, X-rays, liver and kidney function tests, electrocardiogram (ECG) to check for any signs of heart disease, etc.
Your application will then be evaluated by underwriters at the insurance company. Underwriters are highly skilled professionals who use their expertise to review applications to make sure they meet the insurance company's standards.
What is the role of an underwriter?
⟶ They conduct a thorough financial as well as medical assessment.
⟶ They determine the amount of coverage you are eligible for based on your income-proof and other documents.
⟶ They also examine the details on the proposal form and your medical test results to determine the risk you pose to the insurance company.
Policy Issuance Or Rejection
The decision to accept or reject a policy rests solely on the underwriter's assessment. The insurer will issue you a policy if your proposal is accepted. If your profile is too risky, they will reject your proposal straight away or offer a counteroffer wherein the insurer may apply loading, i.e., charge you a higher premium. If you are willing to pay the additional premium, you can obtain the policy.
Review The Policy During The Free Look Period
The insurance company will provide you with the policy papers or documents once you've been issued the life insurance policy. You will usually receive both a hard copy and a soft copy of the policy. The hard copy will be mailed to your address, while the soft copy will be sent to the email address you provided to the insurance company when you purchased the policy.
The insurance company will provide a 15-day free look period after receiving the policy documents. You should take advantage of the free look period to thoroughly review the policy and decide whether or not it meets your needs. Ensure that the policy document includes details about all the customizations, riders, features, etc. you selected.
Should you find any inaccuracies or errors, be sure to contact your insurance company. Make sure the policy document contains all the required terms and conditions, as well as limitations, exclusions, etc. If everything is in order, you can confidently go ahead with the policy, safe in the knowledge that you are adequately covered.
What if you are not satisfied with the policy?
If you are not happy with your policy or if there are exclusions, limitations, conditions, etc., that you do not agree with - you can return it to the insurance company during this period. The insurer will not impose a penalty or cancellation fee. However, certain charges, such as administration fees, stamp duty, etc., may be deducted.
The process of buying life insurance does not have to be complicated. You can buy life insurance online from the comfort of your home. Doing your research and following the appropriate steps is key to buying the right policy - one that meets your and your family's needs and provides the right level of protection.