10 Mistakes People Make While Choosing a Term Insurance Plan
Published On Jun 17, 2021 11:30 AM By InsuranceDekho
Table of Contents
- 10 Common Mistakes People Make While Choosing a Term Insurance Plan
- Selection of a Plan with a Short Term Period
- Selection of a Plan with a Low Sum Assured
- Choosing a Plan Merely on Recommendations
- Delaying the Purchase Decision
- Choosing Cheaper Options
- Filing False Details
- Selecting Unnecessary Rider Options
- Reluctance in Purchasing the Policy Online
- Treating Insurance Policy as an Investment Plan
- Shifting from the Initial Plan
- Take Away
Besides providing financial security to the family and dependents, term life insurance can get you some additional coverage for critical illness and accidental death as well. However, choosing appropriate term insurance involves a detailed evaluation of different policies from multiple insurance providers and people often end up selecting the wrong plan.
So, to avoid making a poor financial decision, read on to know about the 10 most common mistakes people make while buying a term insurance plan.
10 Common Mistakes People Make While Choosing a Term Insurance Plan
Here is the list of some common mistakes that should be avoided while selecting a term insurance policy.
Selection of a Plan with a Short Term Period
People make the most common mistake while buying a policy by considering a plan with a shorter-term period. A shorter-term insurance policy might have a low premium payment, but the renewal after the term end will lead to an increase in the premium rates of the policy. Hence, it is advisable to opt for a plan with a longer-term period that will eventually outlive you and provide death benefits for your family.
Selection of a Plan with a Low Sum Assured
The sum assured is calculated by evaluating the current lifestyle and financial status as well as the future goals of the family. It is advisable to carefully choose the policy amount that will meet all these needs. A low sum assurance will not be long lasting and defeat the purpose of term life insurance.
Choosing a Plan Merely on Recommendations
No sole term insurance plan can provide for the needs of different families through a single set of terms and conditions. That is why these plans are customized according to the family’s financial requirement of the life assured. Thus, it is advisable not to choose a plan based only on recommendations. You should carefully evaluate your needs and find a suitable plan to meet your requirements.
Delaying the Purchase Decision
It would be best to try purchasing your life insurance as soon as you start making stable money to get more life cover at lower premium rates. It is advisable not to delay the decision as the world is full of uncertainties, and you must ensure the financial safety of your loved ones in the face of an unfortunate event.
Choosing Cheaper Options
A proper insurance plan with additional benefits like critical illness cover provides an appropriate sum assured at affordable premium rates. Hence, it is advisable not to go for cheaper versions with fewer benefits and low life coverage.
Filing False Details
You must not hide any details related to health and financial conditions from your insurance provider to get the adequate cover and maximum benefit of your term insurance plan. Hence, it is advisable to provide correct information and not mislead your insurer.
Selecting Unnecessary Rider Options
The rider options are additional benefits to your term insurance policy to make the financial safety net stronger for your family and dependents. However, purchasing excessive riders will only lead to higher premiums, consequently making the policy unaffordable. Hence, it is advisable always to buy the necessary riders to fulfil your requirements.
Reluctance in Purchasing the Policy Online
Purchasing the policy from the online website makes the process quick and affordable by eliminating the middlemen. It also provides the opportunity to compare different policies and select the most suitable ones. You can also get rid of the excess paperwork involved in the offline mode.
Treating Insurance Policy as an Investment Plan
People must realize that the fundamental purpose of a term insurance policy is providing financial protection to the family and dependents of the policyholder in case of his/her untimely death. Thus, it is advisable not to treat your insurance policy as an investment plan to make money and save taxes.
Shifting from the Initial Plan
It is advisable not to shift from the initial plan to another to get additional benefits from the other policy as the transition can be pretty costly. Instead, you can talk to your insurance agent to enhance your existing plan to meet your requirements.
The act of purchasing a term life insurance that will provide financial security to the beneficiary after the life assured’s sudden death requires an in-depth evaluation of different policies offered by various insurance providers. Hence, it is advisable to consult an entrusted insurance agent or a professional financial advisor before investing.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.