Term insurance is a very useful form of life insurance. It is inexpensive and offers a large cover. So if you are looking to buy a new life cover, do consider getting a term insurance plan. Having said this, it is also important to mention here that term insurance needs to be bought with a lot of care. If you do not buy the right kind of cover, you will face many issues later on. Take a look at this article to understand how term insurance works and how you can avoid making some common mistakes to get the maximum out of the coverage.
A step-by-step guide to term insurance
Term insurance is a life insurance plan that covers your life for a fixed number of years. If you die within the policy period, your nominees get the sum assured and the policy terminates. If however you outlive the policy period, there is nothing in return. It is a pure and straightforward form of life insurance. You have to pay the premiums diligently and in return the insurance provider will keep your life covered.
7 horrible mistakes you’re making with term insurance
Like mentioned above, term insurance will only work for you if you stay away from the common mistakes. Unfortunately, people often make these mistakes and end up with less favourable results.
- Not getting your plan early: If you are young and single, you may feel that term is not for you. This is a mistake. You will not remain young and single forever. So rather than waiting till you are older, buy a plan today. You can buy a high cover for a long duration and stay protected for the later years when you have more responsibilities and also develop age related ailments. Buying a term plan at that stage in life will prove to be very expensive. So be wise and buy the plan early on in life.
- Not buying online: It is always the best option to buy your term insurance plan online. You will find the best deal and price on the online plans. When you make your purchase offline, you end up paying a brokerage amount, and that pushes up the overall term insurance costs. This doesn’t happen online as you buy directly from the insurance company. Also, the online plans are available instantly and (in most cases) do not require you to undergo a health check up.
- Not buying riders: Riders add a lot of value to your term insurance plan. Do not make the mistake of just walking away with a term insurance cover. Add some useful riders such as the critical illness rider or the personal accident rider and make your term cover more flexible and beneficial for yourself.
- Not choosing the insurer wisely: Many people make the mistake of buying the first plan they come across without judging the capacity of the insurance provider. It is absolutely crucial for you to buy the term insurance plan from a good insurer who has a high claim settlement ratio. Only then can you get the most out of your insurance cover.
- Being dishonest: Never be dishonest when applying for term insurance. Enter your details related to your health, age, lifestyle, income, etc as accurately as you can. Even a small mistake now may stall your claim later on and cause all kinds of problems for your nominees.
- Not choosing the correct payout option: You can choose a monthly payout option or a lump sum payout option For the death benefit on your term insurance plan. Go through the details of each type of payout and then choose the suitable option. The payout will ultimately aid your nominees after your demise so you must be very careful about it.
- Buying an insufficient cover: Last but not the least, do not make the mistake of buying an insufficient term insurance cover. Take all your financial liabilities, mortgages, future familial milestones and income factors into consideration and then buy the highest possible term insurance cover. An insufficient cover will defeat the purpose of life insurance and land your loved ones in a financial mess after your death.
Keep the points mentioned above in mind and you will surely be able to find the best possible term insurance coverage for yourself. Term insurance is a boon and you must make the most of it.