5 hours Ago By khas khabar
Term life insurance is one of the most cost-effective ways to secure your family’s financial future. However, purchasing the right policy can be tricky, and many buyers make costly mistakes that reduce the effectiveness of their coverage. To help you make an informed decision, this guide outlines the most common mistakes to avoid when you buy term insurance and how to ensure you get the best value for your investment.
One of the most significant mistakes is choosing a short-term policy to save on premium costs. While a short-term policy may seem economical initially, it can become expensive in the long run. Each renewal brings higher premiums; if health conditions change, the insurer may require additional medical tests or impose higher premiums.
Buying term insurance for a longer duration (such as 30-40 years, depending on your age) is advisable to avoid repeated renewals and uncertainties. The primary goal of term life insurance is to provide financial stability to your family. If the coverage amount is too low, your family may struggle to meet expenses and maintain their standard of living in your absence.
The sum assured should ideally be 10-15 times your annual income, factoring in liabilities like loans and future expenses. A term insurance premium calculator can help you determine the right coverage amount that balances affordability and protection. Many people postpone purchasing term life insurance, thinking they don’t need it until they have dependents.
However, life is unpredictable, and accidents or health issues can arise at any age. The earlier you , the lower your premium will be. Purchasing term insurance when you are young also ensures you lock in a lower premium rate for the entire policy term.
Not comparing policies before choosing one is another common mistake. Many buyers opt for a policy from a familiar insurance provider without researching better options. Use online comparison tools to evaluate multiple plans based on coverage, premium rates, solvency ratio, claim settlement ratio, and additional benefits.
This helps you find the best-term life insurance policy that suits your needs. Low premiums can be tempting but often come with hidden exclusions or restrictive conditions. A cheap plan may not provide the necessary benefits when your family needs them the most.
Instead of focusing solely on cost, consider the policy's claim settlement history, flexibility in coverage enhancements, and waiver benefits to make a well-informed decision. Honesty is crucial when applying for term life insurance. Many applicants underreport pre-existing medical conditions, lifestyle habits (like smoking or alcohol consumption), or family medical history to get lower premiums.
However, if a claim is made and the insurer finds discrepancies, the claim may be denied. Providing false information can also lead to policy cancellation. Always provide accurate and complete details to avoid rejection.
Riders enhance your term life insurance coverage by providing additional like accidental death, waiver of premium, or critical illness coverage. However, choosing too many riders can significantly increase the policy’s cost. On the other hand, avoiding riders altogether may mean missing out on valuable benefits.
Carefully assess your needs and select only the most relevant riders that align with your financial goals. With advancements in technology, many insurance providers offer policies online. E-insurance platforms allow buyers to compare policies, read reviews, and purchase term life insurance without an intermediary.
Online purchases often come with discounts due to reduced processing fees. Ignoring e-insurance options could mean missing out on cost savings and ease of documentation management. If you are dissatisfied with your current policy, avoid cancelling it impulsively before securing a new one.
If there’s a gap between cancelling the existing policy and purchasing a new one, you may remain uninsured during that period. Always ensure continuous coverage before making a switch to avoid financial risks. Your financial needs change due to marriage, children, loans, or inflation.
A policy that suited your needs a decade ago may no longer be sufficient. Regularly reviewing your term life insurance ensures that your coverage remains relevant and adequate. Adjust your coverage amount, riders, or insurer to reflect changing financial responsibilities and market conditions.
Buying term insurance is a crucial financial decision that requires careful planning. Common mistakes to avoid include opting for a short-term policy, insufficient coverage, delaying the purchase, choosing the first available option, prioritising price over coverage, providing incorrect information, misusing riders, ignoring e-insurance, cancelling a policy without a backup, and not reviewing the policy regularly. Avoiding these mistakes can ensure your family’s financial security and peace of mind.
A: Mistakes like choosing a short policy duration, inadequate coverage, ignoring e-insurance, selecting the first option without comparison, and providing inaccurate details can reduce the effectiveness of term life insurance. Additionally, term insurance has no maturity benefits, which some buyers may overlook. A: Claims are often denied due to non-disclosure of medical history, false information, failure to pay premiums on time, and policy exclusions.
Not completing required medical tests or failing to update beneficiary details can also lead to claim rejection. Providing accurate information and understanding the terms can help avoid rejection. A: Most insurers allow people aged 18-65 to purchase term life insurance, while some extend coverage up to 85 years, depending on the policy type.
Whole-life plans provide coverage for up to 99 years. A: You should review your policy periodically, especially after major life events like marriage, childbirth, or acquiring a significant financial responsibility. Annual reviews help ensure your coverage remains optimal.
A: Yes, policies may have exclusions, premium hikes upon renewal, and restrictions on riders. Always read the terms and conditions carefully before purchasing a policy to avoid surprises later. By understanding these common mistakes and making informed choices, you can maximise the benefits of term life insurance and provide your loved ones with long-term financial security.
‘Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale. ‘ **Tax benefits are subject to change in prevalent tax laws.
All savings are provided by the insurer as per the IRDAI approved insurance plan..
