Term insurance is one of the most widely used options for people wanting to have life insurance. It is very cost-effective and focuses solely on providing coverage in the event of your death. Not only are they cheaper than traditional life insurance, but they also have a higher cover amount. Due to these qualities of the plan, they are extremely popular among buyers.
While there are many term insurance benefits, it also comes with many risks. In order to avoid these, make sure that you buy the right policy at the right time. This means avoiding making any mistakes while being in the process of purchasing the policy. Here a few commonly found mistakes that you should avoid:
Delaying the purchase
Term insurance is a vital part of your insurance coverage that’s often overlooked by many young professionals. It’s a decision that’s important to make at the right time. The reason that many young professionals delay or not buy term insurance is the notion that everything is going to be fine at their young age. The reality can be far different.
Term insurance rates are highly dependent on your health and lifestyle. With increasing age, more medical conditions arise and your health gets less ideal. This means that chances of death are much higher at a later age. Due to this, insurance companies will charge you more premium at a later age. You can use a term insurance calculator to know the premium to be paid. On the other hand, buying at a young age means you get term insurance for cheaper and that the insurance premium will stay the same for the term of the policy.
Getting inadequate coverage
Term insurance policies are designed to provide a financial cushion to families when you die. Since there is no way to predict when you’ll die, these policies often try to cover as long of a term as possible. Similarly, you cannot predict the exact financial requirements of your family after your death. Having the right amount of coverage is important because it can help your family get through the hard times. Hence, it is important to take into account any and all financial requirements your family may have for the future.
Giving wrong/incomplete information
People tend to give wrong information to an insurance provider. This mistake is considered one of the most dangerous ones. Before you buy a term insurance plan in India, the insurance company will ask many questions about you to provide you the right coverage for the right price. These questions will be focused on your current and future financial situation, along with your personal details, medical records, etc. Many people who hide or give wrong information can end up with legal problems in the future. For instance, if you hide a disease that you have, your family’s claim will be denied once the insurance company traces the illness back to the time when you bought the policy.
Short tenure
Term insurance is a type of life insurance that provides coverage for a long time. It generally does not make sense to have it for 5 or 10 years after buying it. A lifetime can span up to 70 to 80 years. Moreover, there is no guarantee that your family would need to make a claim within the short term of the policy. Having a shorter term makes it more affordable and provides better coverage. However, it does not provide any maturity benefit if you fail to live through the policy’s duration. In this situation, many people are left with no choice but to opt for a new policy. Instead of getting a policy that only covers you for a small amount of time, get a policy that has a longer term. This way, you can avoid paying a higher premium at an older age.
When shopping for term insurance, set a few key parameters that will help you evaluate each policy. These will help you make an informed buying decision. Avoid the mistakes mentioned above and have a profitable buying and policy-holding experience.
