Top 5 Term Life Insurance Mistakes to Avoid in 2025

Life is full of uncertainties where no planning works. Although a term life insurance plan can be a good choice for your loved ones to counter these uncertainties to a good extent. However, every individual has unique protection needs, and choosing a term plan that suits your needs is often easier said than done. This guide explores the top 5 term life insurance mistakes to avoid in 2025.

Top 5 Mistakes to avoid while buying term Insurance

1. Choosing a Shorter Policy Term

The primary purpose of a term insurance plan is to provide your loved ones with financial support in the event of your untimely death. However, this protection only lasts while the policy is in effect, i.e., during the policy term that is predetermined at inception. So, choosing a sufficiently long policy term is vital. 

However, a common term insurance purchase mistake that many individuals make is selecting a short policy term. To understand why this is a mistake, let’s take an example.

Suppose you buy a term life insurance plan for 15 years at the age of 25 years. This policy will provide life cover benefits only till you attain the age of 40 years. If you outlive the policy term, your family will no longer be protected. So, at the age of 40 years, you will have two choices: leaving your family unprotected or purchasing a new term plan. The second option will be quite expensive, as the premiums will be significantly higher compared to your existing term plan. 

So, choose a sufficiently long policy term to ensure that your family stays protected for a longer period at an affordable cost.   

2. Choosing A Low Sum Assured

Another common term life insurance mistake that many individuals make is to opt for a low sum assured policy just because the premium amount is lower. This means that if the person whose life is insured passes away, the policy beneficiary will receive a relatively small amount as a death benefit. 

This amount might not be sufficient for ensuring future financial security. Therefore, it is advised to consider your family’s current and future financial needs and then decide on the life cover amount that might be sufficient. 

Financial experts recommend that the ideal sum assured for a term plan is between 10 and 20 times your annual income. So, if your annual income is Rs. 10 lakhs, then your term life cover should ideally be between Rs. 1 crore and Rs. 2 crore. Alternatively, you can also use a human life value calculator to calculate the ideal sum assured for your term plan.

3- Delaying Term Insurance Purchase

Not purchasing term life insurance early in life is another key mistake that people should avoid. Many individuals think that term insurance is only necessary when you are older. However, it is actually more practical to buy a term plan at an early age. This helps ensure that your premium will be more affordable as compared to when you are in your 30s or 40s. 

This is in part because younger individuals are less likely to experience common health issues such as hypertension, diabetes, etc. The diagnosis of such ailments leads to an increase in the premiums payable for a term plan. So, an easy way to avoid this common term life insurance mistake is to purchase a term plan as early in life as possible.  

4- Providing Incomplete or Inaccurate Information 

Some individuals try to get a term plan with lower premiums by providing inaccurate or incomplete information about current health status, lifestyle choices such as alcohol/tobacco use, and family history of cancer, cardiovascular disease, etc. 

Not only can such omission lead to rejection of your application, but if discovered by the insurer later on, it may also lead to policy cancellation or claim rejection. So don’t make this common term life insurance mistake and ensure you answer all questions in the policy application truthfully and accurately to avoid the possibility of an unpleasant surprise in the future.  

5- Not Opting for Riders

Riders are typically optional add-ons that can augment the basic life cover protection of your term plan coverage by giving you and your family additional financial protection. Common riders available with term plans can provide protection against situations like disability, accidental death, critical or terminal illness, paralysis, loss of vision, dismemberment, and more. 

If any of the covered events occur, having the applicable rider in place will ensure that a predetermined lump sum amount is paid out to you and/or your family. What’s more, this rider payout is payable by the insurer in addition to the death benefit offered by the term plan.  

However, these rides do require the payment of an additional premium that adds to the cost of purchasing a term plan. Therefore, while buying the term insurance scheme, it is crucial to know about the riders available. This can augment the financial security for you and your family members in the case of various unplanned circumstances.

Is Seeking a Low Premium the Root Cause of Common Term Life Insurance Mistakes?

It is human nature to want more for less; however, seeking the lowest possible premium for your term plan can be the wrong choice. Some ways to reduce your premiums, such as purchasing a term plan at an early age or maintaining a healthy lifestyle by saying no to tobacco or alcohol, are definitely desirable. 

Other ways of reducing premiums, such as opting for a low life cover amount or not opting for any riders, are most probably the wrong choice. So, seeking a low premium can be the root cause of common term life insurance mistakes to avoid in 2025.    

After all, the primary goal of a term insurance plan is not to get tax benefits or seek the cheapest protection plan. The primary goal is to ensure that your loved ones have sufficient financial security if they have to face a future without any financial support from you. 

To conclude, when it comes to securing your family's financial future, you cannot buy a term life insurance plan without factoring in the potential consequences of your choice. In an ideal scenario, you should purchase a term life insurance plan at the right time, featuring an adequately large sum assured after opting for suitable riders with full disclosure of all pertinent information to your insurer. 

Lastly, do not be misled by common myths so that you do not make common term plan mistakes when purchasing your policy.