Term insurance acts as a financial shield for your loved ones in your absence. Learn top 10 mistakes you can stay away from while looking for a term insurance plan.
Buying term insurance at the right age is probably the most prominent step that you will take in shielding your family’s finance. It ensures that your family is secured economically in case of an unanticipated situation like your death. The assured sum is provided to your beneficiary either as a lump amount or in monthly instalments. To gain maximum help in such tough situations, you must wisely choose your term plan.
Below is the list of common blunders made by people while buying term insurance:
Buying term insurance for shorter period
It is appreciable that once you have started earning, you finally made a prudent decision of securing your family’s future by buying a term plan. But buying term insurance of 10 years tenure, in your 20s is probably the biggest mistake you will make. A short-term plan with less premium may seem appealing, but is not the right choice. Because, you will have to renew the plan after 10 years which will result in higher premium payments. There are chances of your insurance getting turn down, if you are not sound health wise.
Delaying in purchase of term plan
Ideally, you should opt for a good term insurance, the moment you are earning a stable income. Delaying it because you are fit right now is not an intelligent option. You must be prepared for any unforeseen risks. You will receive better coverage at low premiums, if you opt it at an early age. More the age, higher are the chances of medical ailments and higher will be the premium.
Choosing the first policy that you come across
Since you might be a novice in this field, you should not select the first term plan that you come to know. You must do a thorough research, compare term insurance policies from various vendors, and know about the coverage inclusions and exclusions before making any final decision. Invest some time in getting accurate information, so that you make the right decision.
Giving preference to price and not coverage
There are a lot of factors like insurance company’s reputation, customer service response, claim settlement ratio, additional rider details etc. that you must take into consideration while buying term insurance. You must not blindly choose the most inexpensive term plan. The cheaper a plan is, more will be the exclusions while settling claims. See that your plan provides a good coverage at an affordable rate. Your assured sum should at least be 8-10 times more than your annual income. Though this may not prove to be sufficient enough for resolving all the financial woes, it will at least handle the immediate crisis at hand and give time to plan for future actions.
Keep a check on rider inclusion
It has been advised not go for a cheap term plan. But this does not mean that you should buy an expensive plan that has all the rider benefits included. Riders do enhance your insurance policy. But all the riders may not provide you with better benefits. You must understand which rider can prove beneficial to you, based on your health, lifestyle and income and opt accordingly.
Hiding important details in your application
While filling term insurance application, you must not lie. Provide complete and true details related to your age, health situations and lifestyle like smoking habits etc. This may lead to an increase in premium, but will prove beneficial in the long run. For instance, if you hide details about existing health conditions, any untoward incident caused in future because of that undisclosed information, may result in claim rejection. The insurance company will declare the term plan as null and void and your family will receive no aid in that critical situation. So, for your family’s security, report all the details correctly beforehand and avoid claim rejections.
Reckless change of term plans
At times, you may feel that the current term insurance is not providing you the expected coverage. You may want to shift to a new term plan. But never cancel your old plan and go for a new one hastily. The interim period is delicate and you will land in an economic crisis, in case of a sudden medical emergency. Hence, its suggested to buy the new term insurance first and then cancel the old one. This ensures that you are never out of coverage. Even in the case of policy renewal, do not wait for policy to end. Instead renew it within the specified time period, so that you are out of money when an out of blue emergency comes up.
Do not ignore online offers
While buying term insurance, never rely on just one insurance company. Always check the online quotes of various term plans of different companies. This will help you in getting better deal and cover plan at lower rates. Also, you will not have to pay for any commission charges to agents, since you will be dealing directly with the insurance vendor. E-insurance option has gained a lot of popularity in the past few years and is equally reliable. Just be cautious in buying term plans from genuine IRDA-approved insurance portals. You can visit coverfox.com to compare premiums and features of various insurance companies under one roof. The expert’s advice given here would help you make the best choice ever.
Keep your family informed about your term plan
You are purchasing term insurance to safeguard your family financially even when you are not around. So, it will be a huge mistake, if your family is not aware of this plan or its usage. Though they will never be able to bear your loss, but knowledge about your term insurance will help them in overcoming all financial debts. At least, they will not be cash strapped and helpless in those tough times.
Overlooking the fine print
While buying term insurance, you must pay full attention to the fine details of the policy. Read all the terms and conditions details and get thorough idea about the coverage policy, discounts available, inclusions and exclusions. This will help you in resolving issues that may erupt at the time of claim settlement.
So, now that you have a clear idea about the common goof-ups made by people while buying term insurance, you must be discreet while making the choice. You can always seek an insurance consultant’s help to get more information on this subject. Discuss the same with your family members and be completely satisfied before jumping to any conclusion.