Many first-time term insurance buyers tend to buy a plan without knowing much about how the plan works or how to buy a plan to suit their needs and consequently make rookie mistakes. In this write-up, we address the common mistakes people make and how to avoid them.
A term life insurance policy is one of the most popular types of insurance covers. And, as the name suggests, the term plan provides coverage against the uncertainties of life for a specific period, which can range from to 5-20 years or more. One of the significant features of this insurance that makes it distinct from other insurance policies is that it provides financial protection to the policyholder’s family member upon their demise within the policy period.
This means in the event of your unfortunate demise when the policy is active, the insurance company will pay the death benefit equal to the sum insured to your family. However, if you outlive the policy period, there is no pay out. One of the primary reasons why many people prefer investing in a term insurance plan over other policies is that it is inexpensive, terand you can easily buy a policy with a high sum insured at an affordable premium.
While a term plan is beneficial for all, and there plenty of policies in the market, choosing the right plan to suit your specific needs can be challenging. If you are a first-time insurance buyer, you must be aware of the common mistakes that people make buying a term insurance policy.
Buying a short-term policy
Buying a term insurance is a prudent decision. To get the maximum benefit from your policy, you must choose the duration wisely so that you get protection for a long time. The shorter plans may have a lower premium, but when you renew it later, the amount may increase as your age increases. So, experts recommend buying a long-term plan so that you stay protected for a maximum term of your life.
Delaying the purchase of term plan
The sooner you purchase an insurance policy, the higher cover you get with lesser premium value. Experts suggest the best time to buy a term plan is as soon you get your first salary. The policy will provide you coverage against unforeseen incidents and secure your family’s financial future.
Giving out incorrect information in the policy application
One of the most common mistakes that people make while buying a term insurance plan is that they provide inaccurate information about their health or otherwise to lower the premium. However, this is bad practise. If in the future, the insurance company finds out that you have provided wrong information or deliberately hid any vital information, the insurer may deny paying the sum insured on the grounds of misconduct. In the worst case, the insurer may reject the policy.
Buying excessive riders
Riders or add-ons are additional coverage options that you can purchase by paying an additional premium and extending the scope of your policy. But, you must be prudent with buying riders, as buying multiple riders will increase your premium. So, before you buy the riders, you must assess your specific needs and buy the right add-on to cover the risk. For example, if you work in a high-risk environment, buying an accidental cover would be beneficial.
Not studying the policy documents
Before you sign the policy documents, you must carefully read the policy documents and understand what every terms and conditions mean. It is advisable to hire an insurance lawyer to help you know about the terms and its implications in the future. Being aware of your insurance-related rights will help you make smart purchase decisions and avoid legal conflict in the future.