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Why Many Indians Choose the Incorrect Way to Buy Insurance?

26-April-2022 |

After getting their first paychecks, most people immediately start looking for ways to save money. Usually, a life insurance plan tops the list when it comes to protecting your loved ones and avoiding the hassle of unnecessary medical expenses. Most youngsters might go for a term plan since these plans are simple to understand and are available at a lower cost. But most of the new policy buyers are not aware of the correct steps to buy and term plan.

This is because the insurance penetration percentage in India is around 2.82% which is well below the global average of 3.97%. Lack of awareness and incorrect methods of purchasing insurance policies are the major reasons for this low penetration rate.



What are some ways to be careful while buying an insurance policy?

  • Not reading the fine print

While buying an insurance policy, one should remember to read the fine prints. By reading the terms and conditions, the potential policyholder will better understand the insurance plan. The fine prints also remind us that normal life insurance or term plans are not investment instruments.

Yes, most life insurance and term plans are meant for life cover and not for investment. However, with rider# options, simple life insurance plans can be converted into long term tools. Insurance companies also provide different plans that focus on investment along with providing life cover.

  • Providing incorrect medical information

The health of the individual plays a major role while deciding the premium amount for their insurance policy. Therefore, people often think that they can get lower premiums by lying about their medical conditions. However, this lie might have long term implications. If the policyholder passes away due to an undisclosed medical condition, the insurance company can refuse the death claim. The insurance company also has a two-year timeframe within which they can forfeit the policy if they find out about the hidden medical condition. Providing false information during the initial medical check-up is of no benefit as the grieving family of the policyholder has to undergo the hassle of having the claim rejected in the future.

  • Insufficient cover

Whether it is term insurance or life insurance, the philosophy is the same - leave behind a corpus for our loved ones. While opting for an amount, most people will miscalculate their future requirement. In doing so, they end with a policy that offers insufficient cover for their family.

  • Shorter policy term

An incorrect policy term also curtails the benefits of the insurance policy significantly. For example, if one buys a term insurance policy for 20 years in their early 20s, the policy will expire when they reach their early 40s. At this point, the individual will need to renew their policy with increased premium rates due to their age. The increased rates will upset your budget.

  • Buying an insurance policy late in their life

The quote ‘better late than never’ might not be suitable if one plans to buy life insurance. Because the more one delays getting a policy, the higher will be their premium rate. Since it is assumed that most people in their 40s and 50s are prone to life-threatening disease compared to their younger counterparts. Some individuals think that insurance should only be bought after marriage or after one has children. However, experts advise that one should plan to get their insurance in their 20s.

  • Not preferring the online route while buying an insurance policy

Scheduling and meeting with the insurance agent might feel like a chore for some more busy people. Therefore, the offline method of buying policies is slowly becoming obsolete. Nowadays, most people prefer to buy an online term insurance plan.

Most of the insurance companies have hosted their website and display all their policies in one place. One can even find premium calculators and other instruments. All the features mentioned earlier allow the individual to compare and select the policy that best suits their lifestyle. Online customers get to enjoy certain extra benefits, such as an extended free look period.



What are the correct ways to buy an insurance policy?

One should follow the below-mentioned steps to make the policy buying experience easier for them.

  • Before deciding on an insurance policy, one should definitely read through the terms and conditions. The fine prints will allow the individual to learn the dos and the don’t of their policy.

  • One should properly disclose all the details about their health conditions.

  • For getting the amount of cover which will be appropriate for one’s family, they should first calculate the future budget of their family. Then factor in the major spendings like education or marriage and finally consider the inflation. The calculation should provide the individual with an amount appropriate for cover.

  • The earlier one gets an insurance policy, the more benefits they will get. Firstly, the premium rates will be significantly lower, as the youngsters are not prone to life-threatening diseases. Secondly, the policy offers them the flexibility to choose and modify their nominees later in their life.

  • One should use the online website to look through the different plans and compare the benefits before zeroing in on a policy. This way, the agent will not be able to force you to purchase the term plan that provides them with the most commission.



Conclusion

Term insurance or life insurance is a tool that helps our grieving family. A good insurance policy acts as a cushion for their dreams and looks after the essential expenditure. One can also customise their life insurance policies to provide the policyholder with maturity benefits and cover for a spouse. Therefore, one must take the utmost care and avoid the above mentioned incorrect steps while choosing the policy for their families.

Tata AIA life insurance helps people navigate all the different types of policy and makes it easier for them to buy term insurance. The Tata AIA term plans offer multiple rider# options to the policyholder. Through the options, the policy can be customized to fit the lifestyle of the policyholder. The website also hosts an online term insurance premium calculator, which will help the potential buyer figure out the minimum amount of premium they will have to pay..

One can visit the Tata AIA life insurance website and browse through their different term plans and other life insurance plans.

 

L&C/Advt/2022/Apr/0849

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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

Looking to get a new plan? 

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+91

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

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Read More
What Can Term Insurance Offer to Different Age Groups?
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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA), Tata AIA Life Insurance is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimer
  • 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 they will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions, please read the 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.

  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders, please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.

Need more information?

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