Finance

Common Mistakes to Avoid Before Buying Term Insurance

If you are looking to investin a term insurance plan, you already know its importance. India has 24 insurance companies that offer various types of term plans, which makes it crucial to compare different options. Taking this time to do a comparative analysis will allow you to choose the best term plan as per your requirements.

Ways to buy term insurance

Insurers offer offline and online options to buy a term plan. The features and benefits of both types of insurance plans remain the same. However, the premium is lower when you buy a term plan online. This is because online term plans eliminate agent and brokers’ commissions, which reduces the cost of the insurance company. Generally, buyers receive the benefits of these savings in the form of low premiums. 

In case, your nominees need to file a claim for an online term plan, they will have to contact the insurer directly. However, offline policies allow your nominees to claim the plan benefits through the agent or broker.

A term plan is an affordable way to procure higher financial coverage for your family in your absence. However, here are five common mistakes you must avoid while buying a policy:

  • Choosing a lower coverage

Often, you may select a lower sum assured primarily to reduce the premium. However, this amount may be inadequate for your family’s financial needs, which may result in a liquidity crisis in your absence.

The sum assured that you opt for must be adequate to meet your family’s daily needs and financial goals. To be on the safe side, you must opt for a sum assured, which is 15 to 20 times your annual income. 

  • Opting for a limited duration

The primary term plan meaning is to provide financial stability to your family in case of an unfortunate event. If you choose a limited policy duration, the probability of your nominees requiring these benefits reduces effectively, making the term insurance inadequate.

Experts advise you to select the maximum tenure offered by the insurance company. Several insurers offer coverage until you are 99 years old.

  • Neglecting riders

Riders are additional benefits included in the base policy and provide comprehensive coverage. However, you may make the mistake of neglecting these add-ons due to the extra premium payable.

Riders like critical illness and accidental death benefits are relevant. You must include them in your primary term insurance plan.The former pays a lump sum in case you are diagnosed with an included critical illness. The latter pays the benefits in case of an untoward incident or permanent disability. Contrary to belief, riders are available for a nominal increase in the premium.Consider your requirements to include necessary add-ons.

  • Waiting to buy insurance until you are older

You may not want to think about an unfortunate event when you are young, thereby delaying the decision to buy an online term policy. However, life is uncertain and an accident or sudden illness may hamper your finances. 

To avoid such a scenario, you must avail of term insurance at the earliest. In addition to providing financial stability to your family, you enjoy lower premiums when you invest in this plan at an early age.

  • Not comparing different options

As mentioned, 24 insurers offer multiple types of term policies;not doing a comparison may result in buying a policy that does not suit your requirements.

Take the time to research various options; compare the inclusions and exclusions, terms and conditions, and premiums on different policies. You can do a thorough analysis from the comfort of your home via an online portal.

It is human nature to make mistakes. However, you can easily avoid theseerrors, and buy a term plan that appropriately suits your requirements.

 

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John James is a content writer for Learn To Trade, the foreign exchange education and learning specialists - offering a range of training courses to help people understand the currency trading market, as well as its opportunities and risks.
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