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A term plan is a form of life insurance cover where financial protection is given to the nominee or family of the policyholder upon their uncertain death. Term Insurance plan provides financial security; therefore, it becomes essential to choose the right plan to get the best out of it.
People make many mistakes while buying a term plan which does not have the right consequences. Providing inaccurate information, taking the cheapest cover, not comparing the benefits are some of the common mistakes which people make while buying life insurance.
Here are the detailed common mistakes people make while choosing a term plan:
1. Purchasing a term plan for a short period
Buying a term plan is a prudent decision. Term plan must cover your maximum age to get the most out of it. Shorter period term plan may have small premiums, but if you renew it down the line, the amount of premium increases significantly. A short-term insurance plan may render useless in the time of need.
2. Insufficient sum assured
A term plan is purchased to provide financial coverage to your family after you’re gone. It is based on your current financial status, including the lifestyle and education needs of your children. If you’re the bread earner in the family and you don’t select the right policy amount, your family may still face issues maintaining their lifestyle. The lower amount of sum assured may not last long until your family finds a way of regular income or support your child’s education.
3. Delaying the purchase of a term plan
The early you purchase the insurance, the more cover you get with less premium value. An ideal time to buy a term insurance plan is when you have a stable income in your young years. The policy will cover you against unforeseen incidents of life.
4. Choosing the first option
You must conduct proper research before buying an insurance policy to choose the right sum assured and an affordable premium. Study the plan carefully and select additional coverage, if required, to get the maximum out of your term plan. Do not always choose the first plan that comes your way. Research and select wisely.
5. Preferring price over coverage
A term insurance plan generally covers critical illnesses apart from death benefits. Choosing the right plan may provide you the correct sum assured and affordable premiums. The cheapest plan may or may not give you all the benefits of a term plan. Thus, an affordable plan with a few add-ons will provide you with the right coverage.
6. Giving out incorrect information
While purchasing a policy, you must provide accurate information to get the maximum of your term plan. If you hide an illness or any other information from your insurer, you may not get the cover for it in the future needs. It is always advisable to give out correct information to not mislead your insurer and yourself, even during the renewal of the policy.
7. Opting for excessive riders or no rider at all
Add-ons are always useful for getting the maximum out of a policy. A disproportionate number of it may result in higher premiums which can become unreasonable in the future. Purchase add-ons which may you otherwise need, else wave them off from your policy to make it affordable.
8. Ruling out e-insurance options
Purchasing a term insurance plan online has several benefits such as purchase offers, quick process, and similar. Ruling out e-insurance may result in more paperwork and delay in the process.
9. Shifting without a second thought
People often realize that the current plan is not working for them and thus change hastily to a new term plan which offers several other benefits that may cost a lot. The period between purchasing a new policy and terminating the old one, you may not be covered from any plan. You must think twice before shifting the plans or consider making changes in your current policy to make it more effective.
10. Not studying the plan
The coverage, term & conditions, and everything else must be examined thoroughly to have a fair idea of what you are purchasing and how a policy process works. Do a little research on your own before buying term insurance in India and study the plan throughout to get the maximum out of it.