Youngsters who have just started earning generally have the mindset that they are young and as such, don’t need insurance. However, even these young adults may have dependent family members that can fall into a financial crisis if something happens to them.
With a rising inflation rate, it’s necessary that you look for a safe and cost-effective option that ensures that your loved ones don’t have to grapple with a financial crisis if something tragic happens to you. A term insurance plan is the perfect solution to this problem.
Start with creating an estimate of your financial liabilities which include your regular household expenses, your kids’ education and the related fees, retirement expenses, etc. Now, compare these expenditures with your savings and try to get an idea of where you’re falling short. This simple exercise will assist you in choosing a a term plan that will not only help you fill the gap between your expenditures and savings effectively, but will also not burn a hole in your pocket.
Inaccurate and incomplete information, getting the cheapest term policy, delayed purchases and buying it only to save on taxes are some common mistakes made that might end up in an inadequate life insurance coverage. Listed below are certain mistakes that you should avoid when buying a term insurance plan.
1. Getting Insufficient Coverage
Lower premiums are the USP of term insurance plans as these are the only life insurance policies that allow you to afford a higher coverage level at very low premiums.
Still, what people normally do is they often skimp on the cover amount in order to save a few hundred on the premium amount. This is certainly one of the biggest mistakes one can make when buying a term plan.
The sum assured for your chosen term plan should be selected based on your lifestyle requirements rather than solely on the premium cost. Make sure that it is sufficient to provide for all your family’s financial obligations in the situation that you are no longer around to take care of them.
If you are not sure about how much coverage amount you should go for, you can always acquire the help of online term insurance calculators to get a clear idea. These online term plan calculators let you calculate your ideal sum assured amount based on the details you have shared and your financial profile.
Therefore, make sure to choose the optimal level of coverage when buying a term plan in order to ensure financial stability for your family.
2. Choosing Wrong or Inflexible Policy Terms
Many a times, people end up opting for shorter policy terms in order to pay a lower premium amount. However, this decision could cost them more in the long run instead of saving money for them. It happens because once the term of your policy ends, you will need to buy a new one. And, as you get older, your premium is going to increase. Also, if your health isn’t in the best of conditions, there are chances that you may be denied in getting a new term insurance plan.
Similarly, if you have opted for a term insurance with a longer policy term, you will have to pay the premiums till the end. These term plans are largely inflexible in nature and people only realize their mistake after they have paid the premiums for 3, 5 or even 7 years.
Again, opting for early exit would also cost you a good amount of money. Therefore, take your time to finalize the policy term and get one that will actually suit you rather than choosing a much shorter or longer term.
3. Filling In Inaccurate Information or Not Filling In the Proposal Form at All
Sometimes, when people buy a term plan from a broker or an agent, all they do is sign the proposal form without bothering with the details mentioned therein. And even if they fill out their proposal form on their own, they may not hesitate to lie about certain details. These are certainly mistakes which should be avoided.
The details shared by you in the proposal form forms the basis of your insurance contract on which your policy is issued ultimately. If you provide incorrect details or misrepresent any important fact, your claim might get jeopardized when you actually need it.
Therefore, make sure to fill in the proposal form on your own rather than getting it done by your agent or broker. Also, ensure that all the information shared in the form is correct and true to avoid discrepancies later on.
Final Thoughts:
In the end, make it a point to get a term plan when you are young, healthy and fit. Take good care of your health even when busy, but always plan ahead. The sooner you get a term plan, the better. Acquiring the help of a term insurance calculator will further make it easy for you to compare different term plans and choose one that meets all your requirements.
