Term insurance is one of the financial safety nets that protects the future of one's family. This type of insurance ensures that loved ones remain protected in case of one's absence and offers peace of mind. However, many people tend to make mistakes unknowingly while buying term insurance plans. Below are some of the most common ones and how to avoid them:
1. Opting For Inadequate Cover
Choosing a lower cover amount to save premiums is one of the common mistakes made by many policy seekers looking for term plans. This mistake might lead to unnecessary liabilities as the policy wouldn't be enough to cover your family's needs. Hence, it is always advisable to choose a plan which is at least 10 to 15 times one's annual income. Also, one must consider if they owe any loans or debts that the family may face.
2. Choosing A Short Policy Term
It has also been observed that some people opt for a plan with a lower term, not more than 10 to 15 years, to save money. "However, such an approach might leave such policyholders uninsured during the later or vulnerable years of their lives. It is recommended to choose a policy that can last until one's retirement or meet one's financial responsibilities. A longer policy is equivalent to better protection," says Sarita Joshi, Head of Health & Life Insurance, Probus, a leading Insurtech and insurance broking firm.
3. Delaying The Purchase
Many individuals are of the belief that term insurance is something that can be considered later in life and they do not need it while they are young and healthy. However, the truth is: buying early (in your early 20s or 30s) means lower premiums.
"Waiting for too long might make the premiums expensive or even lead to rejections due to developing health issues owing to age. Also, death due to sudden illnesses or accidents is unpredictable, and being uninsured can leave your family financially unprotected in your absence. Thus, buying early is a smart and cost-saving decision," says Joshi.
4. Hiding Lifestyle Or Health Information
For cheaper premiums, some people tend to hide the truth when buying term plans. However, non-disclosure of pre-existing health conditions like blood pressure, diabetes, past surgeries etc or smoking/ drinking/ tobacco consumption habits can be a serious mistake. Non-disclosure or false declaration of such crucial information can lead to claim rejection later. This means that your family would not get any money even if you paid premiums for years.
5. Adding Many Riders Without Understanding
Adding riders, like critical illness or any other accidental death cover, can enhance your policy, but many people tend to add them without assessing if they need it or not. Some of the conditions that must be considered while opting for riders include lifestyle, medical history, risk factors, etc.
Buying a term insurance is important, but choosing it smartly is equally significant. Do not wait too long, start early and opt for the right cover & term. Review your plan from time to time and increase the cover, if needed. In addition, avoid the above-mentioned mistakes, which can keep your family well protected.
