5 Reasons Low Rates and Good Looks Might Mean Trouble in the Insurance Industry

It is only the responsibleoneswho think about planning and investing in their financial security. The fact that you have decided to go ahead and purchase life insurance for yourself is certainly a step aheadin the positive direction.

When you plan to purchase any insurance policy, you must make your decision considering all the important parameters. Thewhole generalised logic of the cheapest being the best may notparticularlybe the right approach for youthis time.

Settling for a bargain on insurance might not be the wisest call that you take, for insurance is always a long-term investment and not an expense.Ofcourse, it goes without saying that saving money is judicious, but it is importantfor you to thinkand analyse, where it is not optimal to cut corners for your own long-term benefit.

So, here are few reasons as to why your attraction towards low rates might be counterproductiveover the long run -

1. Less Coverage

You purchase insurance to get covered in the event of a calamity or contingency. Therefore, no low rate premium can make sense withoutit having adequate coverage secured for you.

What if you encounter an unfortunate instance wherein you or your nomineeneeds to file a claim and find out that your policy doesn’t cover your situation? In such case, paying any premium, no matter how cheap, will obviously turn out to bemeaningless.

2. Improper Support

It’s a known and accepted fact that you only get what you pay for. If you buy cheap insurance, it won’t cover the cost of having a skilled support and expert team of executives waiting to help you. Because any insurance company will need to cut its cost if its revenuesare low.

Hence, engaging with best lifeinsurance company is particularly important, because it can understand your needs and situations and guide you on the most appropriate policy.

Moreover, if any unfortunate event strikes, proper assistance from the best life insurance company will becomevitalfor you in order tomanoeuvre towards the right direction. If you eliminate this support due to a cost-cutting tendency, you might end up making wrong and more expensive decisions.

3. Rates Are Not Fixed

Sometimes, certain deals look too good to be true. And rightly, they are not true, for insurance policy rates can change and go up.

A cheap policy may simply be an introductory offer, with rates going up in a year or so. In that case, your expenses will increase with the backdrop of limited coverage and inadequate support.

The rate could also change due to your usage behaviouror increased risk suspected. However, slightly more expensive policies may come with a lockedpremium rate over time and can turn out to be a much safer choice for you.

Moreover, the price of a life insurance premium for a given policy is made up of:

• Mortality (Base premium)
• Office premium
• Discounts (if any)
• GST on insurance

4. Low Claim Settlement Ratio

It’svital to consider the claim settlement ratio of the insurer before buying life insurancefrom them. Essentially, it refers to the number of claims the insurance company has settled as against the number of claims it has received. The higher this number, the greater are the chances of the company honouring a legitimate claim.

Before settling on any policy that looks good, you must look out for this number to examine the insurer’s reputation. Often the policies that look good and extremely attractive from the premium viewpoint come from insurers that are not particularly great at settling their claims. If you pick a wrong one by ignoring this critical metric, yourentire goal of going for life insurance may be nullified.

5. Limited Piece of Mind

You buy life insurance to enable you with some peace of mind in your life. Typically, your policy must instil a sense of confidence in you that your loved oneswould betaken care of, financially, in any circumstance.

If you buy a cheap policy and you are aware that you’re leaving out someimportantparametersthat you must be covered on, it’s never going to reward you that piece of mind. In short, the goal of purchasing insurance will get defeated.

Conclusion:

What looks good and attractive on the surface might not be the best choice. The wise always explore the depths and go for the policy from the best life insurance company. Moreover, the policy must closely align with your needs, and provide you withtheright support at the right time.

About the author:

Varsha Channa grew up in Delhi, India and graduated from the University of Delhi. She has been a keen Finance blogger from 5 years. She likes to read and learn about Finance through various ways.