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The importance of taking a life insurance plan is highlighted everywhere in financial planning. We all understand that taking a life cover ensures complete financial safeguard for your family in your absence.
Even though people understand the importance of taking these plans, they commit some common mistakes while taking these life insurance plans.
Here are some of the mistakes that must be avoided while taking a life insurance plan.
1) Delay in taking a plan:
Sometimes you tend to overthink and delay deciding on life insurance for a long time. You may keep looking for plans that offer maximum benefits. While taking time to know the best plans is not wrong, delaying it by not deciding is the issue.
Remember that taking a life insurance plan is a sure shot way to protect your family from uncertainties. No age is too early if you have started earning in your life. Hence, do not delay taking a life insurance plan for any reason whatsoever.
2) Improper/incomplete disclosure of information:
The premium for covering you with life insurance is ascertained by the information you disclose during the policy's inception. Usually, details like age, profession, family history, pre-existing illnesses, disabilities, habits like smoking, alcoholism, etc., are asked during the policy's inception.
The answers you provide concerning these questions would decide the premium and underlying risk for the insurance company. Giving any wrong information or even incomplete disclosure of facts will lead to the rejection of any future claims. This would defeat the entire purpose of taking life insurance.
So, you must provide truthful information and disclose any information that is necessary to the insurance provider.
3) Relying only on your company’s insurance:
If you are working as an employee, you are probably covered by the company's group insurance policy. Relying only on the company's group insurance would be a big mistake and should be avoided for two reasons.
4) Taking a policy with less sum assured:
One factor that affects the premium charged for a life insurance policy is the sum assured that you want the insurance provider to cover you with. It would help if you always calculated your expenses and future liabilities that may arise and accordingly take the sum assured.
You can take a sum assured up to 15-20 times your annual salary. Taking a higher sum assured could cost you a higher premium for now, but rest assured your family would be safe from any uncertainties of your death.
5) Buying plans with a shorter duration:
One of the Insurance mistakes people commit is making plans with short duration. If you make a plan at an early age, like 25 years, and choose the policy term for 25 years, you can no longer continue the term plan when you turn to the age of 50 years.
You would then need to start a new term plan which might be very expensive to start at that age. Besides, you do not face challenges relating to health at an early age. Many of the problems start at old age, and hence you should choose a plan with longer durations.
6) Faith in only one insurance provider:
You might come across people who advise on taking insurance plans from public sector insurers, etc. Always choose the insurance provider that has a higher claim settlement ratio and offers better customer service.
It would be best if you also considered the financial stability and reputation of the insurance provider while deciding which company to opt for. Also, compare premiums of different plans before finally deciding which one to take.
7) Taking a plan that you don’t understand:
Life insurance plans are essentially a contract between you and the insurance company. As in all contracts, there are terms and conditions. Even the life insurance policy has many. The policy document contains detailed conditions and features of the plan by which the insurance plan is governed.
Read the policy document carefully and consult the company for any clarifications that you may deem necessary. It is always better to take a policy that you completely understand.
8) Reservations about taking online plans:
If you are one of those who insist on taking insurance plans from an agent – you might be losing a lot of features and ease of access that insurance companies provide these days. With the advent of the internet and eCommerce, everything has changed with the way we buy things these days. Buying online insurance is very easy and safe. Companies even provide discounts for buying plans online these days.
9) Mistakes while providing details:
One of the common mistakes you might make while buying insurance plans is making mistakes on the insurance application form. The details you provide are very important as they would directly affect the claim settlement if any arises. Giving correct nominee details is most crucial while taking insurance policy because ultimately it is them who need to be benefitted by taking these policies.
Some pointers while taking life insurance plans:
Looking to buy life insurance plans?
If you are looking for an extensive life cover for long-term coverage and at affordable premiums, you can consider a term life insurance plan. Term insurance plans are pure insurance plans that offer a predetermined sum assured to the nominee in case of your demise.
Buy Tata AIA term insurance plans at ease and protect your family from any difficulties after your death. You can get access to all the plan features online and can compare different policies in one place. You can even avail the benefit of the online term insurance premium calculator to ascertain the premium amount.
Get Tata AIA Life Insurance and protect your family’s financial future with flexible premium payments, policy terms, and other features.
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