Buying Your First Insurance Policy? Read This Before You Sign

Step 1: Know Why You Need Insurance

Ask yourself: 'If I die tomorrow, will anyone suffer financially?' If the answer is yes. spouse, kids, parents, siblings. you need life insurance. If no one depends on your income, you might not need it yet (but starting young locks in lower premiums).

Step 2: Buy Term Insurance First (Always)

Your FIRST policy should always be a term plan. Why? Because it gives maximum coverage at minimum cost. A 25-year-old can get ₹1 crore coverage for ₹6,000-8,000/year. No savings, no maturity benefit. just pure protection.

Only after you have adequate term cover (10-15x your annual income) should you consider endowment, ULIP, or other plans.

Step 3: Calculate How Much Cover You Need

Simple formula:

• •10x your annual income (minimum)
• •OR: Total of all outstanding loans + 10 years of family expenses + children's education fund
• •Example: Income ₹8 lakh/year → Minimum cover ₹80 lakh → round up to ₹1 crore
• •Don't underinsure. ₹5 lakh cover is meaningless if your family needs ₹50 lakh.

Step 4: Red Flags to Watch For

Beware of these common tactics:

• •Agent shows 'projected returns' that look amazing → These are illustrations, not guarantees. Ask for guaranteed values only.
• •Agent says 'invest in LIC for returns' → LIC is for protection first. If you want returns, consider mutual funds separately.
• •Pressure to buy before a 'deadline' → There's no deadline. LIC plans don't expire. Take your time.
• •Not explaining the surrender penalty → If you stop paying after 2 years, you lose most of your money. Understand commitment before signing.
• •Suggesting endowment instead of term → An agent earns 5-10x more commission on endowment vs term. Make sure the recommendation is in YOUR interest.

Step 5: Before You Sign. The Checklist

Confirm all of these before signing any policy:

• •You understand exactly what happens if you die (how much does family get?)
• •You understand exactly what happens at maturity (how much do you get back?)
• •You've checked the premium amount AND frequency (yearly/monthly)
• •You can afford the premium for the FULL term (not just this year)
• •Your nominee details are correct (spouse/child name, not parents if married)
• •You've disclosed all health conditions honestly (lying can void your claim later)
• •You know the free-look period is 15 days. you can return the policy within this window
• •You have a soft copy of the policy document