If you have already taken credit to fulfil any goal or cover your urgent need for funds, it is essential to take it into consideration. This is important because if you encounter any unfortunate incident, then your family will have to settle the debt. If they are unable to pay the EMIs on time, then the lenders might take strict actions.
12 Mistakes to Avoid When Buying a Term Plan
Mistakes People Make While Buying Term Insurance Plan
1. Hiding Crucial Medical InformationDuring the purchase of your term insurance plan, it is essential that you reveal any medical condition while filling up your application form. Also, you must attach relevant documents supporting the same. Otherwise, if the insurer finds this information while verifying your policy claim, they can reject the application.
2. Selecting Shorter Policy TermPolicies with shorter terms usually have lower premiums. This might draw you into selecting a shorter duration for your term policy. However, on doing so, the policy might expire too early. Hence, the utility of purchasing it will be lost. To avoid this, you must select a term that will last at least up to the age of your retirement.
3. Adding Unnecessary RidersRiders are add-ons that extend your policy’s coverage. However, while applying for a term insurance plan, you must ensure not to opt for any unnecessary riders. Doing so only increases the premium of your policy without benefitting you in any way. Conversely, you should also not skip out on adding riders to your plan simply to avoid paying higher insurance premiums.
4. Not Browsing through Different InsurersIt is essential to conduct a thorough research about the different term policies available in the market. This will help you to select the right plan with appropriate premiums and maximum benefits. It might take some time and effort but in the end, you can draw immense advantages from them.
5. Skipping Reading of Policy TermsThoroughly reading the terms and conditions of a policy before you purchase it is extremely important. You can then stay aware of the scenarios that the plan covers and the ones that it does not. If there are any queries or confusion regarding any condition, you should contact your insurance provider for clarity.
6. Not Checking the Claim-Settlement RatioIt is essential to check the claim settlement ratio of the insurer from whom you are planning to purchase the policy. This way, you can ensure that if your nominee raises a claim, they can get approval. However, there are some companies that mention a fake ratio. Hence it is essential to verify the same before proceeding.
7. Opting for Insufficient CoverageIf you opt for a lower coverage to pay lower premiums, then it can be a costly mistake. If you opt for lower coverage, your family can face a financial crunch in your absence. Also, it will be more difficult for them if you are the sole earning member of your family.
8. Delaying the Purchase of a PolicyAs your age increases, term insurance policies become costlier. This is so because the chance of your natural death also increases. At the same time, you might have illnesses that can lead to your untimely demise.
9. Getting Influenced by Low Premium OffersAt times companies offer insurance premiums just for the sake of attracting customers. However, they may not settle your nominee's claim in their hour of need. Thus you must not fall for this trap and only trust companies with a good market reputation with your term insurance plan.
10. Shifting From One Plan to AnotherIf you think that your current policy is not beneficial enough, then you have all the right to end it and purchase a new one. However, if any mishap occurs during this short duration, then you will not have any financial protection. So, it is essential that you purchase the new policy prior to ending the current one to get continuous benefits.
11. Not Purchasing a Policy OnlinePurchasing your policy online usually gets you attractive discounts and offers. Additionally, you can complete your purchase hassle-free from any place of your choice.
12. Forgetting to Inform Your Family About the Policy
You must inform your family regarding the purchase of a term insurance plan. If they are unaware about it, they won't be able to use the financial protection in your absence. This can lead to a heavy financial burden on your family during your absence. Hence, in order to ensure that your family members receive the benefits of a term insurance plan, make sure to inform them about the policy details and its benefits.
Now that you know the common mistakes to avoid while buying a term insurance plan, make sure to follow the same and reap the maximum benefits. Additionally, there are several other things to know before buying a term insurance plan that you should know to make the most out of your insurance policy.
FAQs About Term Insurance Plan
If you choose to receive the entire claim amount at once, it will be a significant amount to tide over immediate financial needs. On the other hand, you can choose to hand a fixed amount every month to your family to ensure its fair usage for a longer time. Thus, you should select the payout option as per your needs.
Policyholders must ensure the following things while buying a term insurance plan:
- Getting adequate coverage
- Adding rider plans for extra coverage
- Adding nominee name to the insurance plan
- Disclosing all the existing policies
A term insurance plan does not provide any coverage for death as a result of self-inflicted wounds.
Other Important Term Insurance Guides
Other Important Articles Related to Term Insurance
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.