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5 Mistakes to Avoid When Buying a Term Insurance Plan

Mar 20, 2020 | 2 months ago | Read Time: 3 minutes | By iKnowledge Team
5 Mistakes to Avoid When Buying a Term Insurance Plan

Term insurance is the cheapest and purest form of life insurance. One of the distinct benefits of term plans is the high coverage one is offered at low and affordable rates of interest. The availability of term plans online has made them even more affordable and cheap, increasing their accessibility and popularity.

While term insurance offers a host of benefits to policyholders, in order to make the most of these benefits, policyholders should steer clear of a few common oversights.

Here are a few mistakes to avoid when purchasing a term plan:

1. Procrastination: You might assume that, being young and in the prime of your health, you have little use for a life insurance policy. However, the reality is quite different. As one ages, the risk of mortality increases, too. Thus, you pose more of a liability to the insurer if you opt for a life insurance plan at a later stage of life. Consequently, you would be charged a higher rate of premiums.

The earlier one opts for a term insurance plan, the more lucrative the plan can prove to be. With age and impending health conditions, chances of getting a policy with higher rates of premium increase. One might even struggle to get insured should they wait too long. Thus, it’s never too early to invest in term insurance.

2. Not enough coverage: Term insurance is designed to provide financial security to your dependents in the event of your absence. The coverage that you opt for should be sufficient enough for them to easily sustain their current lifestyle and to account for. As a thumb rule, the sum assured opted for should be 10 to 15 times your annual income. An Inadequate amount of coverage will be exhausted quickly leaving one’s spouse and children to fend for themselves. So, assess your needs and choose a cover accordingly.

3. Incorrect or false disclosure: One of the most common mistakes to avoid when buying term plan is giving false and/or incomplete information to the insurer when filling the application form. One might avoid disclosing information or falsify information to avoid paying a higher premium. However, doing so can lead to financial liabilities in the future.  For instance, if one avoids disclosing a certain health condition when purchasing a plan and a few years down the line the cause of their death is traced to the condition in question, the insurance company may deny the claim amount on the grounds of false disclosure, leaving the beneficiaries financially vulnerable.

4. Short term cover: A term insurance plan for a tenure of merely 5 to 10 years might be cheaper and come with lower premium rates, but it could increase costs for the long term. If the policyholder has outlived the term, they might look towards purchasing a new plan or renewing their existing one. However, doing so could prove to be even more expensive, if your financial circumstances and health conditions have changed during this period. If your health has taken a turn for the worse, you might be charged higher premium rates. Your age can also prove to be a liability.  It is therefore wise to opt for the maximum term that the policy provides so that you are not left in the lurch financially when you need insurance the most.

5. Reading the policy documents carefully: Most insurance companies offer a free look-in period to help you understand the fine print of your term plan. Not taking the time to sit down and read the terms and conditions offered by the insurer is perhaps one of the biggest (and most common) mistakes one could make when purchasing a term plan. Awareness of the various details of your policy is important. If you have doubts about certain aspects of your plan, don’t hesitate to ask your insurance provider questions to gain a better understanding of the policy you’re opting for. It is better to be informed than deal with the repercussions of a hasty or uninformed decision.

Conclusion

Take the aforementioned pointers into account to ensure that your term insurance plan is in tune with your financial goals and the aspirations of your loved ones. The iTerm Plus plan from Aegon Life can be customized as per the needs of a policyholder with four benefit options to choose from. An inbuilt accidental death and critical illness benefit is another plus. Secure the future of you and your loved ones with a term plan, the cheapest, purest form and most efficient form of life insurance available in the market.  


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