Getting Life Insurance? Avoid These 4 Common Mistakes

Buying a new phone is exciting! Say you have bought a new phone but later find out that you could’ve gotten a better one on the same budget. Not a good situation to picture yourself in, right?

The same applies to buying a life insurance policy. It is a long-term investment for the financial security of your loved ones. Don’t you think that you should make a careful decision when buying one?

In this article, we’ll have a look at some common mistakes to avoid while getting life insurance - so you can invest in a plan that’s right for you. Let’s dive in!

Common Mistakes You Should Avoid When Purchasing Life Insurance

Not choosing adequate coverage and policy duration

This is the most common mistake made while buying an insurance policy. You must think long-term while choosing the sum assured. It should cover all the financial goals you have in mind while ensuring that the amount is inflation-proof. For instance, an electric appliance that you bought 10 years ago does not cost the same today. It is because of advancements in technology and the cost of inflation. The same applies to your policy. The expenses that you incur today may significantly increase in the future and the cover amount you choose may not suffice if calculated according to today’s standards. Say you are aiming at leaving a legacy behind for your family or calculating to pay off any big expenses like your child’s marriage or education 15 years later. Then the right choice would be to choose a whole life plan or an endowment plan with a tenure of 15 years or more.

Not customising the policy

There are also numerous add-ons and customizations that can be chosen for your policy and we suggest that you use them to your benefit. This will ensure that the policy is tailored to meet your unique needs.

You can customise the -

• Premium payment term
• Premium payment frequency
• Riders
• Claim Payout Options, etc.

For instance,

1. If you feel your nominee is not financially well-versed, choose the monthly claim payout option so they can manage the money efficiently.

2. You can also customise the premium payment term to your convenience, for instance, if you are a business owner and have an erratic yet large income, you choose to pay the entire premium in one go and enjoy coverage for the rest of the policy duration.

Buying insurance when you don’t need it

You should buy life insurance only if you need it. This depends on two major aspects -

1. Do you have financial dependents or envision any soon? Your parents, spouse, and children are some family members that might be dependent on you financially. If you do have such dependents, you should consider investing in life insurance.

2. Do you have any existing loans/liabilities like a housing loan, business loan, etc.? If your answer is yes, you should invest in life insurance. The brunt of paying off these debts will fall on your family if you pass away and hence, you should be well-prepared for such a scenario. Since life is full of uncertainties, you never know what might happen and it’s a wise decision to secure your family’s future with an insurance plan as soon as you can. But, if you don’t have financial dependents and are free from debts, you can postpone your decision.

Not giving correct details while applying for a policy

Let’s say that your friend has a pre-existing medical condition that he hides from his insurer while buying a term policy. If later he passes away due to the medical condition and the insurer finds out about it, then they can reject any claim requests. His nominee will be in a state of emotional and financial turmoil. Make sure you’re completely transparent with your insurer about your personal, health, and financial details. If you happen to hide or forge any details, the insurer can increase your premiums, reject your application, terminate your coverage, or even deny claim requests. Any misleading, hidden, or incorrect information can come at the expense of your family’s financial security. It is thus better to be safe than sorry!

Buying a policy based on recommendations and amateur advice

There is no single plan that will suit and fit the needs of every single person in this world. You should be aware of your requirements from an insurance plan. Suggestions from friends and relatives should only be seen from a third-person’s perspective. You should be the one choosing and customizing your policy according to your and your family’s needs.

To Conclude

Make sure you avoid these common mistakes when purchasing an insurance policy since this is a decision that will affect the financial futures of both you and your family. Be careful and meticulous when making this purchase.