You might have heard enough about term insurance plans these days and planning to buy a new term plan to secure your future. But do you know buying term insurance plan may not be so easy? There are various factors which one should know to evaluate the need for term insurance and how to get the best term plan.
In this article, I will share such 10 point checklist which will help you to buy a term insurance product. Awareness is the key to execute a good investment or any financial transaction. Otherwise, you may become a victim of misselling of insurance products easily like many people. So be careful and follow these simple guidelines before buying any insurance product.
10 Mistakes to avoid while buying term insurance plan
Term insurance Buying Checklist
Every person learns from their own mistakes only. But here I am going to share the common mistakes many people are making and I think you should not repeat the same. So better to read them and understand before purchasing a term plan.
How Much Insurance is enough
Do you really know how much insurance is enough for you to fulfill all your future dreams or financial goals? Well, everyone might talk about a 1 crore term is cool to buy, but will 1 crore be enough after 20 years from now? So the best way is to define your future goals first and then start accumulating how much money do you need to get them considering inflation. Then you will be able to find out how much insurance is enough for you.
The major concern is the inflation rate which is growing on an average 6%-7% every year. That means your value of money is degrading and expenses of life are growing high. So do the calculation in such a way that you could beat the inflation.
Too much confidence on health
Are you confident on your health and do regular exercises to stay fit? It’s really good news, but is it making you overconfident that you don’t need a high life cover term plan? Then let me tell you that, staying fit will definitely help you to live a perfect life after retirement, but your financial goals need enough term insurance cover as you never know when will death come and in which format.
The lifestyle of the current generation has totally changed and the food habit as well. So even though you are following a strict health routine, you can’t prevent the uncertainties. So better to play safe and stay protected by spending a very little amount.
Can’t think about long term or what will happen in case you die
I have seen many people just avoid buying term plans saying who cares about what happens after 20 years from now. You have to start thinking like a mature person and secure your life with enough insurance. So, start setting up short term & long term goals to achieve them and accordingly find out the need of a term plan.
Not realizing the impact of wrong information shared
Never share wrong information while buying any kind of insurance product. Remember that you are not buying this policy for your benefit. In case you die, your family needs to deal with the insurance claim and related processes. In that case, if you had provided some wrong information, they may face claim rejection and just think how their life would change if they don’t get the money. So be honest while filling up term insurance application form.
Is cheap premium term plans are best term insurance policy?
Do you think a cheap term plan with high life cover is enough? Many people just want to save money where ever possible and they just go with this kind of plans without knowing how good the record of this company while settling insurance claims. Always go with the company who has a good claim settlement ratio, huge number of customers, good financial background, and off-course good reputation.
Not comparing policies online
Do you buy policies without comparing? Then you should change your habit as there are many websites where you can easily compare policies and their features and then choose the lowest premium policy. Why to pay high premium when the benefits are same. Off-course you should not compromise the other factors also to decide which insurance company is good.
Looking for maturity benefits
Many people can’t digest the fact that they are not going to get their paid premiums back when they buy term insurance. For them, companies have come up with term insurance plans with return of premiums. But do you know that you are actually compromising the actual meaning & benefit term plan by choosing such policies?
Depending on Agents
Are you reluctant to buy term plans and also filling up the form? I have seen many people who have their insurance agents who are helping them to fill up forms and complete other formalities of insurance product purchase. But you must know that a single mistake can ruin the entire effort and your family may face insurance claim rejection at the time of getting policy benefit in case of sudden death.
Not reading online reviews or explore about the term plan online
Is the policy you are going to buy is the best term insurance policy? Do you read the policy reviews shared by many expert people or people already purchased the same? If not, then you should start doing the same right now before buying term plan.
Not telling family about the term insurance purchase
Is your family aware of that you are going to purchase a term insurance policy? If not then you should tell your family about this policy right now and also educate them how to use the policy if the situation demands. It will help them to get the necessary benefits for the step you are taking today.
Buying a term insurance policy is not for the benefit of your income tax or just to get a low premium insurance purchase, rather it’s showing your character that you are really worried about your family and planning for their future properly.
Author Bio: This guest post is written by Santanu. Santanu is a personal finance enthusiast, who shares experiences on insurance, investment, savings @ MoneyGyaan.com.