Life is uncertain, and it is impossible to predict the future. So, it is necessary to have a life insurance policy to safeguard your family’s monetary future. Term insurance is one of the most affordable life insurance policies available in the market today. Term insurance plans provide financial security to your loved ones if something unfortunate happens to you during the policy duration. There is no other life insurance policy that offers a high sum assured at pocket-friendly premiums. Term policies strengthen the base of your financial portfolio. Therefore, it is essential to invest in them. However, it would help if you refrained from committing certain errors while buying a term policy. These include:
Choosing an inadequate sum assured
The primary purpose of investing in a term policy is to ensure that your family can take care of their day-to-day expenses and medical costs and achieve their financial objectives. Here, you need to calculate the ideal sum assured; this is because a low sum assured can hamper your loved one’s financial stability. As per the thumb rule, the sum assured should be 10-15 times your yearly income.
Every person has different monetary aspirations. So, it is advisable to choose a sum assured as per your needs. For instance, if you have an outstanding liability of INR 80 lakh and select a sum assured of INR 1 crore, then your family members will have to repay the debt in case of any untoward incident will be left with only INR 20 lakh. This amount may be insufficient to meet the financial expenses and life goals in the long run.
Opting for a shorter policy tenure
You never know when an emergency can strike. So, while purchasing a term plan, ensure that you keep a long tenure. Do not jeopardize the financial security of your family for a nominal amount. Term plans that come with a shorter period have a lower premium than those with a longer duration. Ideally, it would help if you availed of a term plan until you retire.
Delaying the purchase
When you are young and unmarried, you have lesser financial responsibilities on your shoulders. Therefore, you do not understand the importance of investing in an insurance plan. However, this is a wrong mindset, as purchasing a life insurance term plan at an early age has many plus points.
Most importantly, you get the policy at a nominal premium. This is because insurers consider young people low-risk policyholders, as they are less likely to develop life-threatening diseases. So, the mortality rate, in this case, is low. Hence, you can inculcate a habit of savings, reap tax benefits, and get a term plan at a reasonable premium throughout the policy period. Additionally, you can consider investing in a term plan that allows you to increase your life cover per your changing financial milestones. Moreover, if you buy a term policy when you are older, you will pay a costlier premium.
Hiding about your medical condition
Many people avoid disclosing their medical condition to get a lower premium while investing in India’s term insurance plans. Do not make this blunder, as the insurer can reject the death claim if they come to know that the tragic incident occurred due to a pre-existing health problem. This can impact your family’s financial well-being. So, it is recommended that you convey the correct information to the insurer while purchasing a policy.
Term life insurance ensures that the deceased policyholder’s family members can cover all their expenses and achieve long-term financial goals. A term plan acts as an income replacement tool. It helps your dear ones to maintain their lifestyle without worrying about the flow of income. So, consider all these essential aspects and make a wise decision.