When it comes to ensuring the financial security of your family, a term insurance plan is one of the best investments you can make. However, before you make the purchase, you should be aware of some commonly-made mistakes you need to avoid so that you receive maximum benefits from your policy.
Here are a few things you should not do when looking to buy a term plan:
- Buy Insufficient Cover
The purpose of a term insurance plan is to provide sufficient coverage to the family in case something happens to the policyholder. If you choose a policy with a low sum assured because it helps you save on premiums, the funds may run dry very quickly. Ideally, your term plan should be at least 10 times the amount of your annual income. It is also wise to take into account current expenses and inflation before determining the final sum.
- Choose Shorter Terms
Many people opt for plans with a short-term validity in order to pay low premiums. This is a mistake because once the plan ends, they will have to buy a new one. And, the older they are at the time of purchasing a policy, the higher the premium will be. Therefore, you should opt for a plan that provides coverage for the maximum amount of time.
- Hide Relevant Information
Keeping your medical history or any other important information a secret from the policy provider is a big no-no. The reason being, if the policyholder were to succumb to an unrevealed health condition, their claim would be rejected, and the plan can become void. This is why you should always be truthful while filling up the application form.
- Purchase Too Late
When you are young and in the prime of health, a term insurance plan may seem unnecessary. However, that is actually the best time to buy because low-risk individuals are charged a much lower premium than those who are older or suffering from a medical condition. Additionally, as you enter your 30s, your responsibilities increase, and insurance takes a backseat. It is better to make this investment when you are starting out in your career and have fewer expenses on hand.
- Ignore Other Options
It is common for policy buyers to rely on their current insurance providers for new plans. If you do that, you might miss out on a policy that offers greater benefits at a lower premium. To avoid this mistake, you should always do a market analysis of term policies before you settle on one. This is quite easy to do if you buy a term plan online. Check the premium quotes of different companies side by side, and only purchase the policy that fits your requirements perfectly.
- Add Too Many Riders
Riders or add-ons are a great way of supplementing the coverage of your plan. They are designed to cater to the specific needs of the policy buyer, but in many cases, too many of them can increase your expenses significantly in the long run. While it may seem like a good idea to include as many riders as possible, the better option is to select them based on actual requirements.
- Sign Without Understanding
The process of buying insurance requires a lot of care and caution. Unless you have studied and understood all the details of the plan you are purchasing, especially the coverage and premium, you should not sign any forms. And when you do, ensure that you have read the document in its entirety.
Once you’ve carefully considered these details, you can plan to invest in a sound term insurance plan. Not only would it give you adequate coverage for an adequate tenure, it would be economically viable, too.