The Most Common Mistakes to Avoid While Buying Term Insurance
May 27, 2021
Stepping into the world of Term Insurance can be an extremely intimidating experience for young prudent adults like you who understand the responsibility of protecting your loved ones. While “to err is human” is a rationale one must believe in, a Term Insurance Plan is something which is not purchased often and it largely determines the financial security of your family in your absence. Hence, it is extremely important to be careful before you settle for one.
In this article, we list out 4 most common mistakes one is likely to make while buying Term Insurance so that you exercise caution accordingly.
Mistake 1: Getting yourself underinsured
The idea of purchasing Term Insurance is to ensure that your dependents stay financially secure. While purchasing the policy, one might think that the coverage they are opting for is adequate as per current standards for their family and would think about saving on paying high premiums. However, by doing so, they would be grossly miscalculating their coverage as they have not factored in the skyrocketing rate of inflation.
In a developing country like India where the rate of inflation is around 6%, it is suggested that you and your family should be secured for an amount which is 8-10 times your annual income. To get a better picture, it is wise to refer to a Term Insurance calculator before opting for a coverage to ensure that your dependents are adequately covered.
Mistake 2: Opting for a short policy tenure
One of the most common mistakes one tends to make while purchasing a Term Insurance is that they end up purchasing it for a short tenure to save on premiums, without realising that they are signing up for a more expensive policy in the long run.
Let us look at this with an example. A young adult aged 25 years signs up for a Term Insurance plan for 15 years at a lucrative premium rate. However, as he turns 40, he realises that his policy has lapsed. Considering that he has a lot of responsibilities still left to fulfil, he decides to purchase a new plan only to realise that he has to pay an exorbitant premium as his age has increased.
This is one of the most common traps in the Term Insurance sector and as a precaution, one must opt for one of the longest tenures or at least make sure that they are adequately covered up until the age of their planned retirement.
Mistake 3: Not purchasing the Insurance Policy online
Purchasing the online Insurance Policy is your best bet if you want to protect yourself from incorrect coverage information and misleading quotes doing the rounds in the industry. Purchasing a policy online allows you to clearly see the features of each policy being offered and undertake a side-by-side term insurance comparison to choose the one best suited for you. One is likely to also avail additional discounts that are applicable on purchasing the term insurance through an online portal.
Mistake 4: Ignoring riders
The fear of going overboard is largely responsible for overlooking the potential add-on riders carry to boost your Term Insurance benefits exponentially. Many riders today offer extensive benefits for setting a menial amount with your regular premium. The critical illness rider for example, disburses a corpus of funds that would help you deal with a critical illness if you ever develop one through the course of your family. This way, you would be assured that there is minimal financial burden your family goes through even if you fall extremely sick.
As a broad range of Term Insurance plans are available in the market today, you must make sure that you set out to purchase your policy with a clear coverage goal and policy tenure in mind. You should also try to preferably purchase your policy online as it will allow you to compare and analyse the policies available in the market from an unbiased perspective and choose the best plan available. If you are looking for a plan that is tailor-made for you, The ICICI Pru iProtect Smart Term Insurance plan available on the ICICI Bank portal is one of the most comprehensive term insurance plans in the market today. It allows you to customise the plan according to the benefits you seek from the policy and also offers an extensive list of features, such as one-day claim settlement, cover up to the age of 99 years and more. This way, you would be ascertained that the one policy you opt for will cover you exactly as per your needs and leave you worry-free about your family.
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