Crucial Mistakes To Avoid While Purchasing A Term Insurance Plan

Most people are still unaware of the best way to purchase a term insurance plan and often make mistakes by purchasing a term plan that does not fulfil their requirements. There are certain things that a person should consider before purchasing a term plan or else they might end up incurring financial losses after purchasing the policy. 

Below mentioned are some mistakes that you can avoid while purchasing a term insurance plan.

Crucial Mistakes To Avoid While Purchasing  A Term Insurance Plan

Following are some aspects that you can keep in mind while purchasing a term insurance plan:

1. Inadequate Life Cover

Term insurance plan is mostly bought for financial security of family of the life assured. It is advised that the sum assured should be 10-15 times of the life assured’s annual income. If the sum assured is inadequate the amount received as death benefit will not last long. If sum assured is 10-15 times of the annual income of life assured, it does not guarantee that the financial requirements of the family will be taken care of for a long run, but it will provide time for the family to arrange for themselves in your absence.

2. Delay in Purchase

Generally it is advised to purchase a term insurance plan as soon as you start earning a living. You should consider buying a term insurance plan when you are young and medically fit, this not only lowers the premium rate but also provides you coverage at different stages of your life. As your age increases so does the premium of the term insurance plan. 

3. Short Policy Terms

You should consider purchasing a term plan with maximum policy term as it keeps you covered for a long period and provides financial protection at different stages of life. Most people make a mistake of purchasing a term plan with a short policy term as they are inexpensive. A short term insurance plan may be useless when you actually require it. 

4. Adding Excessive Add-ons

Sometimes people add more than required riders to the term plan which can lead to high premium rates. It is always advised to scrutinize the additional coverages and add them to the term plan only when required.

5. Not Comparing

Not comparing policies prior to the purchase is one mistake that occurs repeatedly. People tend to choose a term plan from a company that they have known the longest. However, comparing different plans and insurance providers may help you choose a plan that best suits your requirements without bothering your budget.

6. Misled by Low Premium Rates

Often insurance companies offer term insurance plans with low premium rates. Potential buyer gets attracted by the low premium rates but what he/she doesn’t know is that there are several exclusions. It is important to choose a reputable life insurance company who can provide you with a term plan with no loopholes. 

7. Providing Incorrect Information

Providing wrong information or lying on the proposal form is a common mistake that people make while purchasing a term plan. Disclosing wrong information or withholding certain facts at the time of filling proposal form may lead to serious consequences, because of this mistake your claim could be denied, policy could be terminated, you may have to pay higher premiums. In case the life assured passes away from a pre-existing medical condition which is not disclosed in the proposal form and the insurance provider finds out about it, then the nominee may be denied the death benefit payout.

8. Not Going Through Policy Documents

Many times people do not read the policy documents carefully which leads to the person not being fully familiarised with the policy that is purchased. One should always go through the policy documents carefully to equip knowledge about his/her term insurance policy and specially to look for what all is covered under the policy.

Conclusion

If you are looking to purchase a term insurance plan, above mentioned common mistakes can be avoided if you are careful enough. Above mentioned aspects can help you make an informed decision when it comes to purchasing a term plan. 

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.