7 Mistakes to avoid when you buy term insurance
Preethi Verma is an interior designer and works independently on projects. Being a self-employed person, she did not have any insurance policies to protect herself, but she was not bothered about it as she is 26 years of age and in healthy condition. In the recent pandemic, Preethi was COVID-19 positive because of her frequent travels to visit the clients. She underwent treatment at a hospital for a few weeks and recovered fully, during which she understood the importance of having a term insurance plan.
If she had purchased one earlier and had died her family would have been taken care of, protecting her family and giving her peace of mind. Preethi now realizes her mistake of not availing of a term plan during her early years. Therefore, without further delay, she purchased a term plan with a generous life cover and critical illness benefit to protect herself from future uncertainties.
A term insurance policy is the best companion for people of the current generation as life has become highly unpredictable, and safeguarding oneself and their family is the priority. Although there are investment options available, there is no substitute for a pure term plan that guarantees financial security after your demise. But with multiple insurances issuing different types of policies, one can make bad decisions.
Why need a term insurance policy?
The number one reason to get yourself a term insurance policy is to ensure your family’s financial requirements are taken care of after your demise. The death benefit received by your family members will go towards reducing the financial burden, repay outstanding debt and plan for the future. The other benefits of having a term plan by your side are:
- Choose to receive the benefit as lump-sum or in monthly installments
- Helps to clear any pending loans and liabilities
- Acts as a financial buffer for your family to lead a stress-free life.
- Provides you with riders that offer additional sum assured for events like critical illness, accidents, or terminal illness.
To reap the benefits correctly, you need to make the right choice, and here are some of the common mistakes to avoid while choosing to buy term insurance.
7 Common Mistakes to avoid when you a buy term insurance policy
- Insufficient Coverage
- Providing false information
- Not revealing medical history
- Delaying the purchase of insurance
- Buying many policies
- Nominee details missing
- Expecting returns from insurance
1. Insufficient Coverage
Choosing a life cover with low coverage is one of the biggest mistakes to avoid while buying term insurance. By opting for a low cover, you are putting yourself at a risk of being under-insured, which will harm your family’s overall lifestyle after your passing away. First, assess your requirements such as lifestyle, health condition, family needs, future goals, number of dependents, loans/ debts, monthly expenses, etc., and then choose an appropriate sum assured for the term plan.
2. Providing false information
An insurance company has the right to cancel a term policy if false or fake information is provided by the insured in the agreement. It is considered a serious breach of trust and may lead to the rejection of the claim at a later stage. Details about age, family, medical conditions, previous illness, education level, etc., are some of the details that are frequently found wrong. Some people provide false information to reduce the policy’s premium, which must be avoided. Unfortunately, to save a few hundred in premium, they end up giving incorrect details, which leads to more significant issues in the future, putting your family members in trouble.
3. Not revealing medical history
While most term plans recommend you undergo a medical test when applying, some policies do not ask for medicals. Not undergoing medical tests and providing wrong information regarding your medical history, lifestyle habits, or pre-existing illnesses shall put you at risk of losing the insurance if the insurer finds out later. So, never hide even a single medical condition or treatment that you have or had in the past from the application, as it puts you in good standing and will eventually help in getting your claims processed faster. In addition, by taking a medical test, you are helping yourself by understanding your body condition and tracking down any illness during the initial stages itself rather than waiting for it to transform into something big.
4. Delaying the purchase of insurance
There is a mindset among people that insurance is reserved only for individuals above a certain age, which is not true. This thought makes them consider buying a term plan at a later stage of their life or until they are married, which increases the number of dependents, thereby pushing up the premiums for the remaining tenure. It is always beneficial to purchase a term plan when you are young as the premium is lower during the younger age because of less risk of any kind of health complications in your 20s.
5. Buying many policies
Getting one term insurance policy with a high coverage value is more than enough to provide necessary safeguards for yourself and your family. However, by buying multiple terms plans, it becomes difficult to manage them since you will need to track the premium date, enter correct details, and also inform your nominee or family member, so they don’t miss out on any.
6. Nominee details missing
The benefit amount promised by the insurer is paid only to the nominee or beneficiary assigned by the policyholder while registering the policy. In case of not mentioning the appropriate nominee, the chances of a claim getting rejected are high. Therefore, always make sure to enter all the required details in the application form along with nomination details.
7. Expecting returns from insurance
Term insurance is designed to provide life coverage against uncertain risks and ensure the family’s financial condition remains intact even if the policyholder is no more. However, some do not favor term plans as the premium paid does not provide them with any returns and instead choose ULIP or money back plans. Insurance and investment are two different concepts and should never be combined.
Therefore, make sure that you keep these mistakes in mind and avoid them while buying a term insurance policy. Buying the right term plan is more important than just buying any term plan. To choose the right term plan visit iiflinsurance.com and make the right buying decision.
