Term insurance is the very basic form of life insurance. Term insurance is the kind of life insurance which gives you coverage over a specified term. Term insurance secures your family’s future, if an untoward event leads to untimely death. It helps your family meet daily needs, when you are not around. Your family’s future is important and it cannot be neglected at any point in time. Buying the right term insurance policy is a crucial decision and must be made with utmost care, if you want your loved ones to get the most out of it.
Estimate your liabilities like home loans, children’s education and marriage, parent’s medical expenses, retirement expenses, and so on. Compare these expenses with your savings and determine where you stand and where you want to be. With this, you will be able to choose a plan that fills the gap between your expenses and savings. Use IndianMoney.com HLV Calculator to calculate the amount of life insurance you need.
Providing incorrect details, purchasing the cheapest policy without checking if features match needs, buying term policy just to save tax, delayed renewals and so on, are some of the common mistakes leading to inadequate cover. Below mentioned are certain mistakes that you must avoid, when buying a term insurance policy.
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Most individuals don’t consider liabilities like home loan, car loan, personal loan, credit card bills and monthly expenses like utility bills, and end up availing insufficient cover. Further, they don’t consider inflation and future expenditure like children’s education and marriage. The right way to estimate the correct sum assured of a term policy is by following this thumb rule ‘your term insurance policy’s sum assured must be at least ten times your yearly income’. For example, if your income is Rs 10 lakhs a year, then your term policy cover must be at least Rs 1 Crore.
Another major mistake is opting for a lower cover to keep premiums low. You must remember that the main aim of term insurance is to secure your family’s future. An insufficient cover can affect their life considerably, when you are not around.
You might be tempted to avail a term policy of shorter term, as they come with lower premiums. This would cost you and family in the long run. At the end of the policy term, you would have to buy a new policy. The cost of buying a new policy rises with increase in age. Hence, it is always good to buy term insurance of a longer tenure. It is advisable to get term insurance till retirement age. Your application for term insurance might be rejected if you apply at an older age.
Buying term policy at a younger age is advisable; your premiums would remain constant across the tenure. Consider parameters like your age, health conditions and family’s living expenses when availing a term policy.
SEE ALSO: Best Term Insurance Plans In India
Another mistake is furnishing incomplete or inaccurate information, while buying a term insurance plan. You must doubly verify the filled application form. Inform the insurer on your medical history. If the cause of death is tracked back to an undisclosed health condition, then there are high chances of the claim filed by your nominee or beneficiary being rejected. The policy would be declared invalid or null and void in this scenario. The whole purpose of availing term insurance would be lost. Hence, it is advisable that you fill the application form with the right details. Ensure details like age, health condition, personal habits (alcoholic and smoker), and pre-existing diseases and so on, are accurate.
People often think they do not need insurance when they are young, as they are healthy and fit. However, in your 30s, responsibilities increase and that’s when you realize you need a term insurance plan to secure your family’s future. But at this point, your insurance premium is likely to increase. This is because premium increases as you grow older and the higher premium expense which could have been avoided had you availed term insurance plans at a younger age, will eventually add to your expenses.
SEE ALSO:What is a Term Insurance Plan?
Riders are additional cover offered for additional premiums. There are various riders available which can be added to your term insurance policy. This enhances your sum assured. But having said this, you should not avail each and every rider as this would increase premiums payable. Avail only those riders that are suitable and hold significance when it comes to meeting an important need.
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