A term insurance plan is ideal for providing financial security to your loved ones in case of your absence. It offers death benefits to the beneficiaries of the policy after your death. The amount received can be used by the dependents as and when needed to accomplish their life aspirations.
However, many people tend to make some mistakes when buying term insurance plans in India. These mistakes keep the policyholders from enjoying all the term insurance benefits. Let us take a look at a few common mistakes made by people when buying term plans and how one can fix them.
- Opt for a lower coverage
One of the most common mistakes that people make when buying term insurance is choosing a low sum assured amount to save on the premiums. Here, they do not take into consideration the financial needs of their loved ones, the inflation rate, and their future financial goals. Choosing a lower coverage will lead to insufficiency in meeting the financial needs of the family.
How to fix: The sum assured amount you choose when buying term insurance should be enough to protect your family financially, even in your absence. The amount should help them meet daily expenses and fulfil their future aspirations without any economic interruption. It is advisable to choose a coverage that is 10 to 12 times more than your annual income.
- Choose a limited policy term
Ideally, term insurance only offers death benefits to the beneficiaries of the policy. If you were to outlive the policy tenure, you or the beneficiaries do not receive any benefits as such. Thus, choosing a limited tenure will make the plan ineffective in fulfilling your financial needs.
How to fix: It is wise to choose a term plan with maximum coverage tenure. In fact, term insurance plans available in the market allow you to extend the coverage until 99-100 years of age.
- Do not consider rider benefits
To make term insurance plans a little more flexible, insurers in India offer rider benefits. These benefits tend to enhance the coverage of the policy. Opting the rider benefits with your basic term insurance plans will involve paying additional premiums. Hence, many people tend to avoid buying term insurance with rider benefits.
How to fix: Knowing the importance of rider benefits helps people choose an add-on cover that could enhance the scope of their term plan. Covers such as critical illness benefits can help you (the policyholder) bear the expenses of critical health conditions that you may acquire in the future. Another rider benefit that one should consider opting for is the accidental death benefit that pays an additional amount if you die in an accident. With the return of premiums cover, you can receive the premiums paid towards the term plan if you survive the policy tenure.
- Buying plans without comparison
Another mistake people make is to buy term insurance without comparing different plans. Comparing term policies online will help you understand the various features and benefits, coverage of the plans, affordability, exclusions, etc. That way, you can make an informed decision when buying term insurance plans in India.
How to fix: There are many comparison tools available online to help you compare different term insurance plans. Moreover, if you want to calculate the premiums based on the coverage you need, you can use the term insurance calculator tool to determine the same.
To Sum It Up!
Avoid making these mistakes, and you will be able to choose a term insurance plan that fulfils your requirements and safeguards your loved ones financially after your death.