Term Insurance Plan is an important investment which you should start as early as possible. However, while buying any insurance policy, you should consider some factors to get the best out of it. A term insurance plan makes sure that your life has protection and the standard of living of your family is not compromised in case any tragic event happens to you. In simple words, the payment you pay goes entirely towards giving your dependent a better life.
Top 9 Errors Made While Purchasing a Term Life Plan
Several people often mistake term insurance with a common financial instrument, purchase it, and make payments without fully understanding the policy. It can be because of the ease of online purchasing or confidence in insurers. But that blind faith in itself is a great mistake they make. Term insurance is a failproof instrument that mitigates risk, so if you consider it a child’s play and purchase without prudence, it will cause trouble for yourself or the nominees. Given below is a brief discussion of the nine common mistakes people make in purchasing term insurance.
Buying Plan Without Comparing Premiums
Before you purchase any plan, it is important to compare term insurance premiums across a few insurance companies. Also, the lowest premium plans don’t need to be the best choice, so you must check the coverage before buying any plan.
Buying Plan Without Adding Riders
A term insurance policy provides an additional benefit called riders. You can add riders like accidental covers, third-party liabilities, legal fees, and disability riders. By adding these riders to your policy, you can enhance the protection you receive. However, please note that riders are not mandatory and are available at an additional cost.
Choosing a Plan Without Exploring Variations
There are different varieties of term insurance plans available within the same plan. For example, there is a facility for the family to receive assured sum as a lump sum or in regular instalments in some plans. There can be variations in payment frequency, maturity amount, policy term, etc. By selecting the best options, you can have a comprehensive insurance policy.
Choosing Shorter Terms
A term insurance plan with longer durations helps save money. But some people would choose shorter terms to pay a lesser premium. By doing so, you indirectly increase the premium burden of renewing the policy several times and sacrifice the benefits of a long-term association with the insurer.
When people feel that their term insurance plan will not work, they opt for a different plan the next time or even terminate the plan midway. Making such sudden changes in the policy can have adverse effects when you need the assistance of a plan. So, make decisions only after thoroughly understanding the outcomes.
Providing Incorrect Information
The one thing which is most important to avoid is incomplete disclosures. It is crucial to provide a complete disclosure when buying any term insurance policy. The insurance company may take issue due to incorrect information or clerical errors and can even reject a claim.
Not Buying Term Insurance at an Early Age
If you start term insurance at a young age, the premium rates will be comparatively cheaper. As the age of the insurer increases, the premium also increases. So, it is advisable to have term insurance when you are young and unmarried, so you also have enough money to spare for insurance premiums.
Buying A Plan Without Studying It
Before buying any plan, it is important to gather information from all sources about the plan. You should keep in mind the coverage, available discounts, and policy terms and conditions before buying any plan.
Not Sharing Insurance Information with Your Nominees
The benefits of a term insurance policy will go to your chosen nominees. So, they must be aware that you have term insurance and the whereabouts of policy documents.
Term insurance will help you in the long run by providing the best support to your family in your absence. So, it is always advisable to avoid these common errors while purchasing a plan.