Term life insurance is one of the foundation pillars of our financial lives. It becomes more important to have a term plan if you have financial dependents on you (Parents/wife/kids).
As we all know, there is a lot of mis-selling happening in finance these days. It becomes trickier for insurance as the agents get the highest incentive for selling insurance among all the financial products.
While they may sell (mis-sell) you the life insurance policy which gets them the highest incentive using many tactics. We warn you to remain vigilant and cautious while buying a term plan.
Here are the 5 mistakes you should be aware of while buying a life insurance policy:
Delaying insurance – It is always advisable to buy insurance at an early age. This will result in a lower premium and longer coverage. For instance, buying insurance at 25 would have cost Rs. 9,422 vs buying insurance at 35 which costs 13,960. So not only do you get less coverage but also pay a higher premium.
Buying the cheapest policy – Buying the cheapest policy by searching on websites and sorting the cheapest first is the first thought that comes to a customer’s mind while buying it. However, it is a completely wrong approach in case of a life insurance policy.
You should buy according to your needs. There are many other factors to look for before buying insurance like claim ratio, coverage tenure, modes of premium payment etc. Our dedicated team at RefreshMint looks at all the factors for you to get you the right policy.
Too many add-ons – An agent – from whom you are buying insurance – will insist you to buy some add-ons. Even popular sites which say, “buy insurance instantly” will prefill these fields without properly defining them. Generally, these add-ons are already covered under the policy.
Example, if you own a vehicle and have valid car insurance, then you need to have personal accident insurance of Rs. 15 lakhs. Motor insurers generally add them in the coverage. In the end, you pay a premium for the personal accident insurance policy in both – your term insurance as well as vehicle insurance.
Because unlike RefreshMint, they don’t know about your entire financial portfolio. You could end up paying the same thing at multiple places.
Incorrect information – Giving false information on your insurance policy or hiding a piece of information might lower your premium for now but might result in no claim payment when the investigation team finds out about it.
Never give false information. More you disclose, smoother the claim settlement. Also, ensure that your family members know the details of your term insurance and one of them has been added as a nominee.
Not understanding the plan – The policy comes with a very long term and many conditions. All insurance policies in India come with 14 days of the free-look window, where if you do not like it, you can ask for a 100% refund. In these 14 days, you are supposed to get a physical copy of the policy and read and understand it well.
We have a dedicated team which helps you decipher the key terms for you in your policy. Remember this is the most common area where people can make mistakes.
Bonus tip – There is a difference between term insurance, unit-linked insurance, whole life insurance and endowment plan. You may get mis-sold an endowment plan with the promise of saving taxes for you. It is better to understand them all and choose the right one for you. In most cases, it will be a term insurance plan.
Also, To get a more clear picture of all the conditions and add-ons you should have, do check out our articles on how to choose the right term insurance.