What Mistakes Can I Avoid While Purchasing a Life Insurance Plan?

Purchasing life insurance is one of the best investments you can make for yourself and your dear ones. A life insurance policy can be purchased for a variety of reasons, including protecting your family financially in the event of the breadwinner's sudden death, achieving long and short term financial goals such as child's marriage or higher education, retirement savings, and so on. 

Hence, the need to choose the best option for your future and that of your family necessitates a thorough analysis of the benefits you desire from your life insurance policy. Moreover, it can cost you a lot of money if you don't think things through from the start, make hasty decisions, and abandon your insurance too soon. So, let's learn about some of the mistakes that should be avoided while purchasing a life insurance policy. 

What Mistakes Can I Avoid While Purchasing a Life Insurance Plan?

Here are some blunders that wise policyholders should avoid while purchasing life insurance.

1. Undefined Objective 

The majority of people get life insurance to save money or avoid paying taxes on their income. They completely disregard the truth that the primary objective of a life insurance plan is to financially safeguard and care for the policyholder's dependents in the event of the life assured's untimely death. When someone is offering you a life insurance policy, make sure you understand why you are purchasing it. After you've written down your financial goals, you may choose the type of life insurance you wish to acquire. However, if you need assistance determining this, request a requirements analysis from your advisor or salesperson. If your advisor or salesman is unable to undertake a thorough needs analysis, your decision may wind up benefiting the salesperson at the expense of your needs.

2. Inadequate Coverage

Suppose the breadwinner died, and the nominee filed an insurance claim, but the amount obtained turned out to be insufficient in covering the dependents' financial needs and requirements. In that case, the family will suffer from financial distress due to inadequate payouts. Hence, it is essential to ensure that you have enough insurance cover by factoring in your monthly household bills, children's education and wedding expenses, your parents' requirements, and any other financial obligations. You can also use online life insurance calculators found on an insurer's website to calculate your needs effectively. Always remember that if a life insurance policy does not meet the actual conditions, the objective of purchasing the one is defeated.

3. Lack of Research

Multiple life insurance plan options are available in the market. So, knowing the different alternatives in the life insurance market can help you make a better decision about where you want to put your money, depending on your unique circumstances. For instance, a term plan only covers the family against the chance of the life assured's death by providing coverage at a low price, but there are no maturity advantages. Moreover, the unit-linked insurance plans assist in attaining long-term financial objectives such as saving for a child's further education or a wedding. Since a portion of the premium paid is invested in the market and a part of the premium is utilised to provide life cover, you can expect your investment to grow with ULIP plans. Other plan options include whole life insurance plans, endowment plans, child's insurance plans and retirement plans.

4. Not Keeping the Nominee in the Loop

It must be noted that a policy is bought for the benefit of your family, so not discussing and updating the policy's details, including the claim process, with your spouse, parents and the nominee, can place them in a difficult position in the event of a claim. Hence, it is essential to ensure that your policy contracts and details are kept securely and are accessible to your family. 

Endnotes

It is best to avoid the missteps mentioned above by being aware of your rights and duties and the policy terms and conditions. Moreover, it is crucial to have a reliable insurance provider who can guide you honestly throughout your policy term. 

Also read - Popular Life Insurance Plans In India 2021

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.