With uncertain times brought about by the pandemic, people have further realized the importance of having life insurance. The purchase of life insurance products (like a term plan) has increased drastically as more and more people have been seeking financial cover for their dependents.
What is a term plan? A term plan is a form of pure life insurance that offers coverage to the policyholder for a fixed period. They are more popular than other life insurance products as they offer huge coverage for lower premiums. It is important to access all the components and research thoroughly before buying term insurance.
Here are 5 common mistakes most individuals make when they buy a term plan:
- Insufficient tenure
The ‘term’ of your term insurance is one crucial component of your policy. Several individuals get lured into buying term insurance for a shorter term for less premium. However, they forget that after the tenure is over, at an older age, it will be far too expensive to buy a term insurance plan. It is important to estimate the number of years for which you are going to have or are likely to have any dependents and liabilities. A shorter tenure with a low premium might seem a luring deal right now, however, in the future, protecting your dependents would become more expensive as you age. Hence, it is important that you assess your financial planning and long-term goals before deciding the tenure.
- Insufficient sum assured
One of the biggest mistakes to avoid while buying term insurance is choosing an insufficient sum coverage. The amount of coverage is the fund that your dependents will receive in case you lose your life during the duration of the plan. It is essential to ensure that the amount suffices to meet their needs. Insufficient coverage may inevitably lead to them suffering from financial hardships in your absence. Along with the needs of your dependents, it is also important to consider any of their long-term goals for which they for dependent on you for the money. Also, take your liabilities into consideration while estimating a sum assured so that your family does not go through the trouble of repaying them. A sufficient cover ensures that in your absence, your family does not face any financial turmoil and they can fulfil their needs with ease.
- Hiding information
There are certain components that an insurance company takes into consideration for determining your premium. One of the major components is the health of the policyholder. One of the mistakes to avoid while buying term insurance is hiding any health conditions or lifestyle habits from your insurance provider, even though it may seem like an interesting choice while buying the insurance to do so in order to get a lower premium. However, things may go downhill whenever a claim is made. If the insurance companies later get to know about any hidden information, they may reject the claim. This may lead to your family being in an undesirable position in your absence.
- Postponing your term plan purchase
It is a common myth that individuals assume they do not need life insurance until a certain age. With the complexities of life and several financial expenses, buying life insurance often goes on the back burner. However, delaying the purchase of life insurance can cause unexpected consequences in the future. The more you delay buying term insurance, the more your premium is likely to be. This is because your age is one of the major factors that insurance companies take into consideration while determining the premium of your term insurance. When you buy a term plan online, the lower your age is, the more affordable your premium is likely to get locked for the duration of your policy.
- Not utilizing online resources
There are several tools that you can access online before buying term insurance. You can browse through different plans, use online calculators, and access your needs before narrowing down your choices. These online resources will help you choose a plan that truly fits your needs. When you buy a term plan online, you also get better offers as compared to when you purchase the same plan offline. This is because the cost associated with providing commission to the insurance agent, along with other costs that are borne by the company, is eliminated.
