Ensure that the claims process of your term plan is not painful for your family by avoiding these mistakes while buying the term insurance plan.
Do you know that a minor mistake can lead to a claim rejection of your term plan? And you do not want to compromise the financial security of your family just because you were unaware of some facts. Read on to know about common mistakes while buying the term plan.
Incomplete Disclosures
A very common mistake that people make with respect to term insurance policy plan is non-disclosure of medical facts. In term insurance, there may or may not be pre-medical check-ups. But when you are filling the form, the company could ask for medical information. Not revealing the health facts for getting the benefit of the lower premium is not advised as the insurer may most likely reject the claim payment in such cases.
Group Life Cover Dependence
Do you think depending on group life cover is enough? This is one of the mistakes that people make with term insurance policy. Normally, companies offer group insurance which is quite limited. They are 2-5 times of the annual salary of the employee. This range is rarely adequate. It is important to think in terms of making your family’s long-term future secure. Also, group cover will cease if you plan to leave the job and decide to start your own business.
Selecting an Insurance Plan for a Shorter Tenure
One of the most serious mistakes one could make is to go for a short tenure. This can give some benefit in terms of lesser premium. However, this is wrong in strategic terms. Let us assume a situation. You buy insurance at age of 27 and for a term of 10 years. At 37 you will have to go for a new plan. The new insurance plan will be more expensive. In short, it is best to avoid making this mistake with the term policy. With mortality rate range going up each year, it is vital to focus on the larger picture. You have to think positively. Expect to live a long and happy life.
Judging a Plan Based on Only the Money Involved
Another very common mistake which people make with term insurance policy is to opt for an insurance which is inexpensive. Such plans may exclude some important features such as flexibility or crucial riders. One should consider the guarantee period’s length. Moreover, the level of customer service and claim settlement ratio of companies must be considered before buying a plan. The general reputation and the financial strength of the insurer are also an important point before buying a plan.
Delaying the Purchase Decision
Another common mistake which people make with term insurance policy is that they think it is better to wait it out. This idea is wrong. When you are in the prime of your life, it is the best time to buy insurance. You get the benefit of lower premiums and financial protection against unforeseen vagaries. Applying for adequate coverage at a later age could take a big hit on your pocket.
Think of the Bigger Picture
To save on premiums, many people opt for a lower sum assured. However, when tragedy strikes, this policy may not be enough to cover your family’s financial needs. It is also important to take a plan which covers at least 10 times your annual income. So review your family’s specific financial requirements, age, and lifestyle of each member to get the right term plan.
It is vital to take out the time to assess what you are buying. Insurance is a high involvement product. Without due diligence, no decision should be made. It is imperative to get the right long term deal.