Avoid Committing These 5 Blunders while Buying Term Insurance
Are you finally making the decision of buying term insurance to safeguard the financial security of your family? If that’s the case, before you feel good and pat your own back, you need to make sure that you’re not committing the common mistakes that most people make when buying term insurance plans.
While purchasing term insurance, many people tend to get myopic and make short-term decisions that don’t help their family adequately in the occurrence of any unforeseen event. Here are the top 5 blunders you need to avoid making while you invest in term insurance plans:
- Selecting A Short Tenure
It is a common tendency for many people to buy a term plan with a shorter tenure to save some money in the form of making payments for a lower premium. However, this habit is at best a blunder, because of two reasons.
First, it defeats the purpose of buying insurance in the first place. Any insurance plan is for the purpose of the family’s protection, and a matured term plan offers no benefit to the family in case there is an unforeseen death of the policyholder post-expiry. Secondly, once any term plan expires and it’s time to buy the next one, the premium amount automatically becomes higher as the age increases.
This only means that over the long term, selecting a short tenure is not beneficial in any way. Hence if you’re young, you must make it a point to opt for term insurance plans with a higher tenure.
- Opting for Insufficient Cover
At every point of purchasing insurance, you must remember that you shouldn’t buy policies just for the sake of it. The idea behind the purchase is to ensure a comfortable lifestyle for your family in case of your absence and leaving behind an inadequate cover isn’t going to help at all towards that end.
In order to calculate the appropriate coverage amount, insurers like Future Generali provide online insurance calculators on their website. By inputting few values, these calculators generate results within seconds. While using a term insurance calculator, you must factor in your present living standards, your debts that your loved ones will have to pay off, and the time it will take them to ensure a continuous stream of income with the inflationary trends. Based on these, you should settle on a comfortable coverage amount, which might feel very big now, but in that situation would be useful.
- Not Researching Adequately Prior To Purchase
With the conveniences of the Internet world, it is very simple and hassle-free to gather information about the different insurance products and service providers available in the market.
Since there are so many players in the insurance market, it makes sense to thoroughly analyse and compare for the features and benefits they offer with their plans. You must evaluate for reputation, claim settlement ratio and the respective charges to arrive at the optimal decision. Studying for these factors and understanding customer reviews helps to make a choice you won’t regret later.
- Disclosing Incorrect Information
Filling out the proposal form inadequately or leaving it incomplete can turn out to be one costly disaster. Factors such as your age, health condition, smoking patterns and so forth are very important and must be shared correctly and precisely in the insurer’s records.
It is common for people to buy a policy when they’re quite young and keep information to themselves assuming that they will outlive the maturity. However, if due to any unforeseen reason that doesn’t happen, and the insurance company investigates the death to find out it was caused due to health conditions, they could reject the claim and declare it as void. Then, in that situation, there will be nothing to protect your family in spite of you paying out premiums.
- Keeping Family Unaware About the Purchase
It is common to find many people buying insurance, but not telling and educating their family about their purchase and the procedure to redeem it if the need arises. The worst and most unfortunate thing that can happen is that you have the best term plan for your family’s protection, you’re no longer a part of this world, and they’re unaware of any of the benefits they’re entitled to.
In that scenario, even though you have taken the steps and shelled out the premium expenses regularly, they will not receive any support.
You need to realise that a term insurance plan is not just the instrument to tone down your tax liability, but to actually secure your family. Not communicating about it is one of the worst blunders you can make.