Uncertainties of the pandemic have made people reflect further on having a life insurance plan. It has led to a rise in the purchase of term insurance plans as more people seek to secure their dependents. Term insurance is pure life insurance that offers a life cover to the policyholder for a fixed tenure. The reason behind its popularity is that it offers an immense sum assured at affordable premiums.
Term insurance is a financial instrument for the long haul. To gain maximum benefits from it, and make the most of your purchase, it is essential that you avoid making some common mistakes. Below are some mistakes that people often make when they buy term insurance:
- Insufficient life cover
The life cover that you choose when you buy term insurance directly affects your loved ones. When your life insurance coverage is low, it might cause a financial crisis for your dependents in your absence. Hence, choosing insufficient coverage is a common mistake that adversely affects you and your loved ones over the long haul. Ensure that you choose an amount that suffices to meet the needs of your dependents. Take their everyday needs along with their long-term goals into consideration such as education. Also, take into account inflation when you are estimating the coverage for the future. Along with the needs of your dependents, you also need to consider your liabilities. It ensures that your loved ones do not face the burden of repaying your debt in your absence.
- Concealing information intentionally
Your insurance company considers various factors while determining the premiums. Your health and lifestyle are also key factors that are taken into consideration. Several individuals make the mistake of hiding important information regarding their health when buying an offline or online term plan. They fear that revealing the information will lead to a direct increase in their premiums.
Also, along with health, when the insurance company asks a policyholder about their lifestyle habits, many buyers conceal or lie about it. For example, an individual who smokes lies to the insurance company that they never smoke. You may lock a lower premium for your term insurance by hiding an important information regarding your health and your lifestyle habits. However, in the case of your sudden demise, when your nominee applies for a claim, the insurance company may raise this issue. If the insurance company finds out about the hidden information regarding health or lifestyle, the company might reject the claim altogether. Rejection of the claim would put your dependents in an undesirable place financially. Hence, avoid the mistake of concealing or lying about any information with your insurance company.
- Lesser than required tenure
When you buy term insurance, you get a life cover for a fixed term. After that period, your term insurance benefits will lapse. Hence, you must choose a sufficient tenure while buying a term plan. Select the tenure depending on the approximate time your dependents will take to become independent. Also, take into consideration the time you will need to repay all your debts. If you have an insufficient tenure, you might have to buy term insurance again in a few years. The more your age, the higher will be your premium. Hence, buying a term plan again in the later stage of your life will prove quite expensive. Instead, select a longer tenure, and lock your term insurance at a lower premium.
- Procrastinating your purchase
Several young individuals procrastinate buying term insurance considering that they do not have any responsibilities, or they are quite young to plan their finances. However, the reality is quite the contrary. You can lock term insurance benefits at the lowest premiums when you buy a term plan at a young age. It ensures that over the years when you take up responsibilities, you have a sufficient life cover for which you do not have to worry about. You can focus on your other goals and investments, as your family is already secure with your term plan. The younger you are, the lower your term insurance premium is likely to be. Hence, one mistake to avoid is procrastinating your purchase of a term plan.
- Buying offline instead of online
There are several ways to buy a term insurance policy. You can buy a term plan online directly from the insurance company, or offline through an agent. However, it is essential to note that buying online is much more beneficial than buying the same policy offline. When you buy term insurance online, the premium is lower than that of an offline plan. This is because the commission of the agent and several administrative charges have been eliminated.