In today’s world, it has become more important than ever to have life insurance. It ensures that in your absence, the needs of your family are taken care of. There are several types of life insurance out there, one of the simplest and most affordable ones being term insurance.
What is a term plan? Term insurance is a type of insurance where you get a life cover for a fixed period. Within that tenure, if the policyholder loses their life, the sum assured will be received by the nominee. Once you have bought one, here are some mistakes to avoid while buying term insurance:
- A short duration of the policy
The shorter the duration of your term plan, the lower will be your premium. This lures several people to buy a term plan for a shorter duration than needed. It is a common mistake that people get lured into, since short-duration term plans are inexpensive. For instance, when you purchase a term plan around the age of 25 for 15 years, the premiums are likely to be quite low. However, when the plan ends at 40, buying additional term insurance would be expensive. An increased premium at the later stage of life would be difficult for most individuals to pay. There is no one tenure of term insurance that is the best. Instead, choose an adequate term depending on which stage of your life you are in.
- Insufficient coverage
The coverage you choose when you buy life insurance is a crucial decision, as it affects your loved ones in your absence. The thumb rule here is to ensure that the coverage you choose can easily take care of the needs of your family. Also, take your liabilities into consideration so that any outstanding debts do not burden your family. Several people miscalculate or underestimate the funds that will be required in their absence. This is one of the crucial mistakes to avoid while buying term insurance, as it can affect you and your loved ones directly.
- Hiding or misleading medical information
Several policyholders get tempted to lie about their existing medical conditions or lifestyle habits while buying a term plan. They do so in order to get a low premium on their term plan. While as tempting as it would be to lie to your insurance company, know that in the event of your demise, it is possible that your health condition would be revealed to them. In such a case, the insurance company may refuse the claim completely. It would leave your loved ones in a helpless situation in your absence, negating the whole point of life insurance. To save a few bucks in the premiums by hiding their medical conditions, people suffer in the long haul when the claim is denied. It is important to remember the purpose of what a term plan is for and to avoid conceding any information purposely.
- Procrastinating your purchase
Several people know the importance of having term insurance and yet delay it. They often assume that it would be required only after a certain age. However, they often overlook that it is comparatively quite easier and practical to buy insurance early in life. Age is a major factor that influences the premiums of your term insurance. The more your age is, the more is the premium of your life insurance. Also, when you are buying an online term plan, look for the ones that allow you to increase the coverage over time in your life.
- Seeing insurance as an investment
People often misunderstand the purpose of a term insurance plan. Many buy a basic insurance without properly reading the terms and conditions. They find it a waste of money and prefer investments that offer returns. However, life insurance is not an investment and instead is a layer of protection that enables your loved ones to live a good quality of life in your absence. It plays the role of a financial blanket for your loved ones.
There are several term plans available online and offline too. It can be confusing to choose the best one amongst so many choices. Instead, compare the different plans available and select the one that meets your needs. Also, ensure that you read the fine print while buying a term plan to avoid any problems later.