Term insurance is one of the most important financial tools for Indian families. It gives financial security to your loved ones if something happens to you. A term plan offers a high life cover at a low premium. This makes it affordable for salaried people, self-employed professionals, and business owners.
However, many people make mistakes while buying term insurance. These errors can reduce the benefits of the policy. In some cases, claims may even get rejected. This article explains the most common mistakes to avoid when buying term insurance. It will help you make a smart and informed decision.
Choosing an Incorrect Sum Assured
One of the biggest mistakes is buying a low life cover. Many people choose a small sum assured to save premium. This is risky.
Your term insurance cover should be enough to replace your income. It should also cover loans, daily expenses, and future goals like children’s education.
A simple rule is to choose a cover that is at least 10 to 15 times your annual income. Always calculate your needs before deciding the cover amount.
Delaying the Purchase
Many people delay buying term insurance. They feel it is not needed when they are young. This is a costly mistake.
Term insurance premiums increase with age. Health issues may also arise later. Buying early helps you get lower premiums and better coverage.
The best time to buy term insurance is when you are young and healthy. Early planning saves money in the long run.
Hiding Medical Information
Some buyers hide health issues like smoking habits, diabetes, or blood pressure. They do this to get a lower premium. This is a serious mistake.
Insurance companies verify details at the time of claim. If false information is found, the claim can be rejected.
Always give correct medical and lifestyle details. Honest disclosure ensures a smooth claim process for your family.
Not Comparing Term Insurance Plans
Many people buy the first plan suggested by an agent. They do not compare options. This can lead to higher premiums or fewer benefits.
Different insurers offer different features, claim settlement ratios, and riders. Comparing plans helps you get the best value for money.
Use online comparison platforms to compare premiums, benefits, and insurer reputation before buying.
Ignoring Claim Settlement Ratio
The claim settlement ratio shows how many claims an insurer settles in a year. A low ratio can be a red flag.
Some buyers focus only on low premium. They ignore the insurer’s claim history. This can cause problems during claim time.
Always choose an insurer with a strong claim settlement record. It gives confidence that your family will receive the payout on time.
Not Adding Important Riders
Riders enhance your term insurance coverage. Many people skip riders to save money. This may reduce protection.
Important riders include:
- Accidental death benefit rider
- Critical illness rider
- Waiver of premium rider
These riders provide extra financial support during difficult times. Choose riders based on your needs and budget.
Selecting the Wrong Policy Term
Choosing the wrong policy duration is another common mistake. Some people choose a short-term policy to reduce premium.
Your term insurance should cover you till your major financial responsibilities are over. This usually means till retirement age.
Select a policy term that matches your income years. This ensures long-term protection for your family.
Not Informing Family Members
Many policyholders do not inform their family about the term insurance policy. This can delay claims.
Your nominee should know:
- Policy details
- Insurer name
- Claim process
Share policy documents with your spouse or trusted family member. This helps in smooth claim settlement.
Skipping Policy Review
Life changes over time. Marriage, children, salary hikes, and loans increase responsibilities.
Many people never review their term insurance plan. This may result in inadequate coverage.
Review your policy every few years. Increase the cover if needed to match your current lifestyle and liabilities.
Buying Without Expert Guidance
Some buyers do not understand policy terms properly. They skip reading policy documents.
This can lead to confusion later. Terms like exclusions, waiting periods, and riders must be understood clearly.
Take guidance from trusted insurance experts or reliable comparison platforms before finalising your plan.
Conclusion
Buying term insurance is a crucial financial decision. Small mistakes can have a big impact on your family’s future. Choosing the right cover, giving honest information, and comparing plans are very important.
Avoid these common mistakes when buying term insurance. Plan early. Review regularly. Choose wisely.
A well-chosen term insurance plan ensures peace of mind and financial security for your loved ones.