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How do I make a life insurance policy 2022?


“In this world full of uncertainties, one needs to be certain about the safety of their loved ones. This can be done by protecting yourself with the armor of life insurance.”- An unknown writer perfectly sums up the importance of life insurance in these few words.

How do I make a life insurance policy 2022?
How do I make a life insurance policy 2022?

A life insurance policy is a legal contract between you and the life insurance provider. In return for the regular premium paid by you, the insurer sends the money to your loved ones after a certain period of time known as maturity or in case of your death.

However, apart from acting as a financial safety net for your loved ones in your absence, life insurance has some other benefits as well. It can act as a savings tool, provide you with financial independence in your old age and help reduce your tax liability. There are plenty of reasons to invest in life insurance. However, buying one of the best plans for you can be a bit difficult.

Here is a guide to help you select the right policy that suits all your needs. 

1. Assess your life insurance goals

Goals may vary from person to person. You should plan for your life insurance goals with the right life insurance policy. If protecting your family's financial security is your primary goal, you can buy term insurance plans that offer high coverage at affordable rates.

If you want to save for your child's education or are planning to buy a dream home for yourself, you can consider investing in a unit-linked insurance plan. You can also buy a retirement plan that will ensure regular income for your daily expenses after retirement.

2. Calculate the optimal insurance cover that you need

Many financial advisors suggest that your life insurance cover should be at least ten to fifteen times your annual income. However, there are several factors you should consider when estimating the ideal life insurance amount. If you have debt, it can be challenging for your family to meet equal monthly installments (EMIs) in your absence. Besides, you need to arrange funds for your children's higher education or marriage. As a result of inflation, your family may face difficulties in maintaining their current lifestyle in the absence of the main breadwinner. Thus, you need to find the total of the following:

  • Your family's annual expenses are multiplied by the number of years it may be necessary to replace the income
  • The total amount you owe and the cost of paying off the mortgage, if any
  • The amount you need to set aside for future expenses like your child's education, marriage etc

From the above mentioned expenses, you can deduct the sum of your liquid assets like cash in hand or bank and any other type of investments to get adequate life insurance cover.

3. Determine the amount you have to pay as the premium and find the policy offering the best deal

You can use an online premium calculator to find out how much premium you have to pay for the required amount of life insurance. Compare different plans to find the policy that offers the most coverage at a rate that fits your budget. You should also evaluate your premium payment tenure based on your earnings for the coming years.

4. Select the correct policy term

The policy term should ideally be for the number of years your family will be financially dependent on you. A general rule of thumb for reducing the ideal policy term is to subtract your current age from the age at which you expect your income to stop or a certain life goal you want to achieve.

5. Opt for a reputable life insurance provider

Life insurance companies with more than 95% Claim Settlement Ratio (CSR) for consecutive years are generally considered reliable. CSR is the percentage of claims that the company has settled in a financial year compared to the number of claims filed. You can visit the Insurance Regulatory and Development Authority (IRDAI) website to view the updated CSR of various insurance providers in India. It is also advisable to read customer reviews and understand whether your life insurer's claim service is fast and hassle-free.

6. Do not conceal facts from your life insurance provider

If you consume tobacco or alcohol, or work in a hazardous industry, tell your life insurance company about these details. You must also disclose any current illnesses or family history of serious illnesses. These factors influence your risk profile. Providing accurate information is important to prevent future claim denials.

7. Read the final policy document carefully

Understand all the terms and conditions clearly before you make the final commitment. Find out the relevant details like lock-in period and under which circumstances the claim will not be valid.

8. Buy life insurance at an early age

Life insurance premiums are lower when you are younger. Thus, you can save on the cost of your premium if you buy your life insurance policy as soon as you start earning. You can start with less coverage and add more riders as your income increases.

9. Choose a comprehensive plan

Medical emergencies can adversely affect your income. Therefore, it is important for you to choose a comprehensive plan with the right riders:

  • If you are diagnosed with a serious medical condition like kidney failure, cancer or cardiac diseases, the critical illness rider provides full claim payment. This amount can be useful in meeting medical expenses and protect you against loss of income due to such ailments.
  • Accidental death benefit rider provides additional amount to your loved ones in case of your sudden death due to an accident. This protects your family's future from the threat of undermining a regular stream of income to maintain their current lifestyle
  • A permanent disability rider works for your future premiums if you are permanently disabled due to an accident. Your life cover continues for the rest of the policy term
  • Terminal Illness Rider gives you access to funds to deal with terminal illnesses like cancer by paying in full before death
  • It will help if you always look for an insurance provider that offers such benefits without charging you any hidden fees.

10. Evaluate your life insurance needs regularly

It is important to evaluate your life insurance needs periodically because your financial goals may change with age and life events such as marriage or childbirth. You can periodically review your life insurance needs and adjust your cover accordingly. This will also look at inflation.


Life insurance is an essential financial tool. Keeping these tips in mind and thorough research can help you make an informed decision to find the best life insurance policy with adequate coverage.

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