Term insurance, the simplest and most cost-effective type of life insurance, should be a part of everyone’s financial portfolio. However, the number of people who have actually opted for term insurance in India is on the lower end of the spectrum. Only 1 in every 5 urban Indians has a term plan. A lack of awareness about the basics of term insurance is partially to blame.
While term insurance is a sound financial option, for most individuals to make the most of its features and benefits, one should be thoroughly apprised of and refrain from making some fairly common errors. In building such awareness, one can derive the most benefits from their term plan.
Here are the 8 primary mistakes that you must avoid while taking a term plan.
Selecting a short term In pursuit of the lowest premium, you might select a plan with a short term. However, if one opts for a short term and ends up outliving the term, they would need to renew their old plan or purchase a new one, potentially increasing their premium rates. Put simply, term insurance is lifelong protection for your family, and a plan with a short term does not serve that purpose.
Selecting a lower sum assured A term plan's sum assured should ideally be 10-15 times your monthly income. One might find it tempting to select a lower sum assured owing to the lower premium that comes with it. This would, however, leave your family with an inadequate amount of money in your absence. Selecting a sum assured that fulfills the needs of your family and gives them the financial freedom to sustain their current lifestyle is crucial.
ProcrastinationLife insurance might not seem like a huge priority for those in the prime of their health. However, the older one gets, the higher the risk of mortality and, thus, the more expensive the term plan. To avail of the lowest premium rates and the best possible coverage, purchasing a term plan early can prove to be beneficial.
Giving insufficient information While applying for term insurance, you would be asked to supply the insurer with certain personal details, including your medical history and lifestyle habits. Not disclosing relevant information during the application