Home Business Insights & Advice Six common mistakes to avoid while purchasing a term insurance plan

Six common mistakes to avoid while purchasing a term insurance plan

by John Saunders
19th Nov 20 12:32 pm

Term insurance is an important financial tool, which provides risk coverage against any type of unfortunate event. Nowadays, as there is an extensive range of term insurance policies available in the market, choosing the right plan can be a herculean task. To have adequate coverage to provide the right financial protection to the family it is important to check various aspects before purchasing the policy. Also, the policy buyers should avoid some common mistakes while zeroing in on a policy.

Let’s read further to know what are the common mistakes you should avoid while buying a term insurance plan.

Delaying getting a term insurance plan

The longer you wait to purchase a term insurance policy, the premium rate of the policy will increase more and you will have to pay a high premium for the term insurance plan. With the increase of age, the premium rate of the policy also increases as old people prove to be riskier for the insurance company, whereas young individual poses a low risk for the insurer. Thus, the earlier you buy a term plan the lower the premium amount you will have to pay towards the plan for a larger coverage and longer tenure.

Not comparing the policies

To cater to the various requirements of the insurance seekers there are different types of comprehensive term insurance plans offered by the insurers. This is another mistake that people do while purchasing the term plan. It is very important to compare different policies online. By comparing the plans you can choose the plan which provides higher coverage at a lower premium rate. You can also visit the website of Paisawiki to get detailed information about the term insurance policy. Make sure that you read the fine prints of all the policy documents to exactly what are the benefits that the policy is offering.

Not disclosing the medical details

One of the main reasons the insurance application is rejected is because of non-disclosure of medical details or providing incorrect medical information to the provider. It is very important that the insurance buyer share the right information related to any medical history or habits like smoking and drinking during their application process so that they don’t face any problem in case of a claim made. In the case of hiding any information from the insurer, the insurance company might reject the application process or do not entertain any claim filed by the beneficiary of the policy in case of demise of the insured person due to any of the reasons related to it.

Buying an insufficient term cover

The basic principle of purchasing any type of insurance is to provide adequate coverage to the family so that their future financial needs are taken care of. The same goes for the term insurance policy as well. However, unfortunately, most of the insurance buyers miscalculate their financial requirements and end up purchasing a low cover. While purchasing a term insurance policy it is always recommended to choose a coverage amount, which is 10-12 times the annual income. If the policy buyer feels that their family will require more financial backup in the future then he/she can choose a cover that exceeds this amount. Make sure to consider all the present and future aspects like loan repayment, the child’s higher education, inflation, etc. while zeroing in on a plan.

Shorter policy tenure

This is one of the most common mistakes that customers do while opting for a term policy. Term plans with shorter policy tenure come with a lower premium rate and may lure the policy buyers into making the wrong decision. For instance, if at the age of 25 years you purchase a term policy for 20 years, the plan will cover you till the age of 45 years. Now if you purchase another insurance policy at the age of 45 years then you will have to pay a higher premium rate. When adding this to the other responsibility and expenses at that age, it can burn a hole in your pocket. Thus, instead of purchasing a term plan for a short tenure try to choose a plan which provides coverage for a longer tenure at a lower premium rate.

Ignore the riders offered by the policy

Besides the death benefit offered by a term insurance policy, there are various rider options offered by a different term plan to increase the policy coverage. Go through the terms and conditions of these riders before adding them to your base plan. Also, make sure that you know what the riders’ options are offered under a particle plan before zeroing in on one.

The bottom line!

Term insurance policy works as a great financial cushion for the family in case of any eventuality. Make sure that you avoid these silly mistakes while purchasing the policy and make an informed decision.

Leave a Commment

CLOSE AD

Sign up to our daily news alerts

[ms-form id=1]