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Investing in a term insurance plan is considered one of the fundamental pillars of sound financial planning. A term policy safeguards the financial future of your family and dependents from the uncertainties of life. If you are looking to buy a term insurance plan, it is imperative you conduct adequate research and avoid these common mistakes.
1. Not comparing insurance plans
There are multiple term insurance plans offered by different insurance providers that vary in coverage, premium, flexibility, etc. Not researching enough and comparing plans before buying can end up being expensive in the long run. With all the information available online, it has become very easy to do your due diligence. Buying the cheapest plan may not serve you well in the future. It is imperative to look for a term policy that offers comprehensive coverage and is cost-effective at the same time.
2. Not getting an adequate cover
The aim of term insurance is to help your family meet their financial needs even in your absence. If you get a lower cover that cannot enable them to meet life’s goals, such as higher education, wedding, home loan, etc., the purpose of the insurance is lost. Ideally, your cover should be 15 to 20 times your annual income. If your liabilities are higher, for example, having to pay for the education of multiple children/grandchildren, you may need to get a proportionately higher cover. You need to consider all your expenses, liabilities, and inflation when calculating your ideal term insurance coverage.
3. Not selecting the appropriate tenure
The purpose of investing in a term insurance plan is to protect the various life-stage goals you wish to achieve for yourself and your family. The tenure you select for the insurance coverage should be commensurate with the timelines when you expect yourself to be free of all major financial liabilities. For example, if you have a mortgage that you would be paying off till the age of 65, your coverage should last at least till then so that the family is not burdened with the loan repayment. The proceeds from the claim should be more than enough to settle all your financial obligations without impacting the family’s financial future. Simply put, the policy term should be a number that equals your expected age of attaining zero liability minus your current age.
4. Not leveraging riders#
New-age term insurance plans also offer additional benefits in the form of add-on riders#. Not many people pay attention to them due to the added cost factor. However, the benefits of these riders# far exceed their nominal cost. Some of the popular riders#, such as the critical illness cover, accidental death benefit, payout for accidental disability, etc., offer an added layer of financial security. It is important to evaluate them and pick the ones aligned with your professional/lifestyle needs.
5. Not being forthcoming about material information
The application form for a term policy requires you to state various personal, financial, and health-related details. This includes disclosures ranging from your annual income, family history, bad habits (if any), and your health conditions. Ensure that the details you provide are complete and accurate. The underwriter derives the premium cost specific to your risk cover based on this information. Incomplete disclosure (even if unintentional) or falsification can render your insurance coverage void. If something untoward happens to you and the investigation traces it back to a health issue or a bad habit not disclosed in the application form, it may result in a repudiation of the claim made by your nominee(s).
6. Not checking for flexibility
Your needs and goals are not static, then why should your term insurance be? Look for an insurance plan that gives you the option to increase your life cover as you reach different milestones in your life. This can be especially useful for young individuals who may require higher coverage later in life. Getting married, having a child, or buying a house are some key milestones that necessitate a relook at insurance coverage. A flexible term plan allows you to enhance coverage for a nominal increase in premium without the trouble of going through fresh medical underwriting. Otherwise, buying a new term plan will get a lot more expensive with age and be tedious to manage.
A commonly asked question is whether it is safe to buy term insurance plans online. The answer is yes. As long as you visit the genuine website of an insurance provider, it is absolutely safe to buy a term insurance policy online. A good practice is to always type in the provider’s website in your address bar. Do not click on links that you get via email, as you could expose yourself to phishing attacks.
Buying term insurance online comes with many added benefits. The process is extremely easy and transparent. All you have to do is key in your basic personal information, furnish a few supporting documents, and pay digitally. Buying online also allows you to compare plans and make an informed decision yourself without being influenced by insurance agents who may have an agenda. Additionally, online portals allow you to customize term plans to best suit your needs. Not to forget, buying online is cheaper as there are no agent commissions to factor in.
A well-rounded term plan from a reputed insurance provider offers much-needed financial security so that the dreams of your loved ones can take wings, no matter what.
This plan provides:
The dual benefit of whole life protection up to 100 years of age and a Life Stage Benefit option without fresh medical underwriting (the process of evaluating the insurance company’s risk while insuring your home, car, health or life)
Choice of four death benefit options: Life option, Life Plus option, Life Income and Credit Protect.
An Inbuilt Payout Accelerator Benefit that gives 50% of the sum assured upon diagnosis of the policyholder’s terminal illness
The option to add multiple riders# to further enhance coverage#
Flexibility to receive death benefit payout as a Lump sum or Income (up to 60 months) or both
Lower premium rates for female policyholders
*Tax benefits on premium paid as per prevailing tax laws
Pick the right term insurance and secure your peace of mind and your family’s future today.
Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
#Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
*Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you