Umer Zahid
With numerous life insurance plans to choose from, how to know which is best? There are many factors which you have to keep in mind before deciding to buy life insurance for yourself. So, in this article, we will guide you on how to choose the best life insurance plan in Pakistan.
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Before buying any life insurance policy, you need to consider a few things, like why you need it, which type of life insurance is best for you, how much coverage the policy will provide and which insurance company to go for. However, before considering any of these factors, you need to have the basic knowledge about what life insurance is, how many types of life insurance there are and how these life insurance policies do work.
So, without further ado, let’s discuss how to choose the best life insurance plan in Pakistan.
How to Choose the Best Life Insurance Plan in Pakistan
Before telling you about best life insurance plans in Pakistan, we will tell you about what life insurance is.
What is Life Insurance?
Life insurance is a contract between an insurance company and policyholder in which the insurer guarantees payment of death benefit to named beneficiaries when the policyholder dies. The insurance company promise a death benefit in exchange for a premium paid by the policyholder. It is a legal contract and once the policyholder dies, the named beneficiaries like children, spouse, parents etc. will receive the death benefit from the insurer.
What is a Death Benefit?
The death benefit is the amount of money which the insurance company has to pay to the beneficiaries when the policyholder dies. The amount of money depends on the type of insurance and coverage that will be provided under the policy.
What is Premium?
Premium is the money that a policyholder pays for insurance. A premium is determined according to your insurance plan and some other factors. The policy holder has to pay the premium monthly or annually. It is important to note that the insurance company will only pay the death benefit or face value to the beneficiaries if the policyholder had paid a premium to the insurance company.
Types of Life Insurance Plans in Pakistan
There are two types of life insurance plans in Pakistan, namely:
- Term Life Insurance
- Whole Life Insurance
Term Life Insurance
It is a type of plan which guarantees death benefit if the insured person dies during a specified period. Usually, the specified term is of 10 to years. If the insurance plan matures and the insured person stays alive, then the beneficiaries nominated by that person shall not receive the death benefit from the insurance company.
Note: Some insurance companies allow term life insurance holders to renew the policy or upgrade it to a whole life insurance plan by giving some extra premium.
Whole Life Insurance
The whole life insurance is a type of plan which remains in force throughout the policyholder’s life, provided that the premium is paid regularly. The insurance company will pay the death benefit or face value to the beneficiaries when the policyholder dies, either in instalments or all at once. The whole life insurance premium is quite high as compared to term life, which is why many people opt for term life insurance.
Now that you know the basics of the life insurance, let’s get to the main point, which is, how to choose the best insurance plan in Pakistan.
Guidelines | Choosing a life Insurance Plan
Read the following instructions to choose any life insurance plan.
Decide If You Need Life Insurance or Not
The first thing you need to consider before choosing a life insurance plan is whether you need it or not. The life insurance policy provides the much needed financial coverage to the dependent kin after the insured person dies. So, the dependent members of the family don’t have to worry about things like debts, income or fees etc.
Determine Which Type of Plan Is Right For You
After deciding that you want to buy the life insurance, you need to consider which type of life insurance plan will be better for you and which is within your budget. If you want a secured and guaranteed future payment for your loved ones, then whole life insurance is better for you. But, you need to pay quite a lot of premium annually in whole life insurance.
On the other hand, term life insurance has a low premium but no death benefit after the policy has matured while the policy holder is still alive. So, it is not a wise decision to invest in such policies. However, it is good for young parents who want to ensure that their children get financial assistance until they reach adulthood.
So, deciding which plan is right for you, depends on your budget and coverage you need in order to secure the future of your dependent family members.
Selecting the Life Insurance Policy
Before deciding the policy, you need to consider the following questions.
- For a term life insurance policy, is the term length you want available?
- Can a term life policy be converted to a whole life policy, and how?
- Are the policy’s premiums guaranteed-level, flexible or increasing periodically?
After getting answers to these questions, select the type of life insurance plan which is best for you.
Selecting the Insurance Company
Once you have researched all about different life insurance plans, you need to decide which insurance company is right for you. Go to different insurance company website and see if they are offering the same life insurance plan which you need. See how much premium they are charging. Once you’re satisfied with an insurance company, just go to their office or contact the insurance agent to get the life insurance you need.
In Pakistan, there are many insurance companies like Jubilee, efu, Adamjee, state life etc. who offer different life insurance plans and are trust-worthy names. You can check their official websites to buy the desired insurance policies.
Note: Insurance industry is notorious for having a lot of scammers. So if you’re opting for a company that is not very well known, it is wise to do a thorough research of the company before you make a deal with them.
And that’s how you can choose the best life insurance plan in Pakistan. If you have any queries, let us know in the comments.
