Planning to buy a life insurance plan? Beware of these mistakes and make your purchase a worthy one!
Investing in a life insurance is one of the best decisions you will make in your life for yourself and your loved ones. The motive behind purchasing a life insurance policy can be many such as protecting your family financially in case of sudden death of the bread winner, meeting long term and short term financial goals like child marriage or higher education, retirement savings etc. It is an important financial product to buy and you don’t want to goof up while making a choice. Here are the mistakes you can avoid while buying a life insurance plan.
Unclear of the objective of buying life insurance policy
Most people invest in life insurance plans to save money or tax on their salary or income. They totally ignore the fact that the main purpose of a life insurance policy is to financially protect and take care of the dependents of the policy holder in case of sudden death of the insured. Note down the objectives of your investment and only then select the kind of life insurance you want to buy. There are many types of life insurance products in the market by various life insurance companies offering unique products catering to different requirements and needs of each individual.
Not calculating the required insurance cover
It’s great, if you have understood the importance of buying life insurance. But blindly buying any cover is the biggest mistake you will make. A person needs to ensure that they have adequate insurance protection at all times. Just imagine in case of an eventuality where the bread winner dies and the insurance claim is made but the claim received does not fulfil the financial requirements of the dependents and they still face financial crises. The purpose of buying a life insurance policy is then defeated if it does not fulfil the actual requirements when needed. Always check your insurance needs by taking into consideration your monthly household expenses, children’s education and wedding cost, your parents’ needs and any other financial liabilities. You can also effectively calculate your requirements by using online life insurance calculators available on an insurer’s website.
Not doing research on different life insurance products offered
You should make yourself aware of the different life insurance products available in the market. A term plan gives you pure protection from death risk only. Term plan offers a huge amount of coverage for a low premium but does not offer any maturity benefits. In ULIP plans, you can expect your investment to grow, as a part of the premium paid is invested in the market and part of the premium is used to provide life cover. These plans help in achieving long term financial goals like saving for child’s higher education or wedding. And, then you also have endowment plans which offer guaranteed benefits as the investment is done in low risk instruments. The return on these plans are lower compared to ULIP plans. So, depending upon your individual requirements knowing the different offerings in life insurance market will help you make a better choice and decision where you want to put your investment.
Not knowing the premium paying term
Every insurance plan has a premium which you have to pay to the insurance company on a regular basis. Every policy has a different premium paying term depending on your selection or as mentioned in the policy schedule. Knowing the premium paying term (PPT) will help you to know how much you will be paying for the policy over the years and also calculate the return on that policy. This will help you evaluate if the returns are fulfilling your expectations and requirements. Knowing PPT will also help to calculate your long term budget requirements. Premium payable is different for each policy depending on the individual life insurance product. You should ensure the premium payment is within your reach to avoid your policy getting terminated due to non-payment of the premium amount.
Not checking the claim settlement ratio
Claim settlement ratio is one of the important factors that help in understanding if the insurance company is reliable when it comes to settlement of claims. You should always go with an insurance company that has a healthy claim settlement ratio. This will give you peace of mind knowing your death claim if ever it comes will be paid without any hassle to your loved ones. Claim settlement ratio also helps in understanding the overall performance of the company. Hence, it helps you in making a better decision when selecting any life insurance company. Above are the some of the points you should be careful about when selecting a life insurance plan. Even after getting a life insurance plan there is a cooling off period of 15 to 30 days. You should go through the policy terms and conditions and if you don’t agree on something you can always return the policy and get your premium back minus the expenses incurred by the insurance company.
Here's an extensive list of mistakes to avoid while buying life insurance
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