A life insurance policy is an insurance cover plan that pays out a sum of money after death of an insured person or after completing a set tenure.
It is important to get a life insurance cover because,
- It will safeguard your family and children’s future after your death.
- After completing the assigned tenure, you will get a sum of money.
- You can get tax benefits from a life insurance scheme.
But, there are some common mistakes that one can make while taking up a life insurance policy. Let’s see what these mistakes are:
Not understanding the best suitable insurance policy for you: If you do not have detailed knowledge about how a life insurance policy works, you might end up getting a wrong or less benefitting plan. There is plenty of information available online, regarding various life insurance policies. You should read more of it before investing.
Moreover, you should also consider the differences between a term plan and a cash value insurance plan. While a term plan provides you death benefits, a cash-value plan like an investment linked plan, can support you in any other financial commitments while providing you tax benefits.
Not being convinced about your reasons: You should not buy an insurance policy because everyone is buying one. Figuring out your motive is important so that you can choose a right plan. Whether you are buying a policy for investment purpose, as a protection, or to save on taxes, needs to be analysed before choosing any plan.
You take up an inadequate cover: This is one mistake that anyone can make if you choose your policy haphazardly. A life insurance cover offers financial benefits to your family after your demise which will safeguard their future in coming times. Hence, you need to consider the size of your family before investing in any plan. You do not want your family to end up with insufficient fundings and encounter further financial crisis because you chose a wrong plan.
‘I am not married/don’t have dependents, so I don’t need a life insurance policy’: This is a broadly perceived opinion about a life insurance policy. However, you need to consider that a life insurance policy can also cover your end-of-life and funeral related expenses so even after your death, your policy will not let you be a burden on anyone.
Thinking that you need a life insurance cover only for old age: A life insurance policy comes with riders that can cover critical illnesses, accidents, and it can also provide financial aid during similar unfortunate situations like total and permanent disability (TPD). You can come across these circumstances at any phase of your life, thus believing that a life insurance policy benefits only at an old age is a misconception.
Feeling that you need to hire an agent to get a policy: Some of us might feel that buying an insurance policy is strenuous task which requires a lot of time and paperwork. This perception encourages us to hire an agent to do the policy related tasks for us. But paying a huge sum to an agent can be avoided. Most of the insurance providers offer application/registration for their insurance policies online for which you do not have to waste a lot of time. You can also submit your documents online without physically visiting the company’s office. Insurance policy provider firms, if requested, often send over their representatives to you to finish your application process. Considering this, hiring an agent to get a policy is a waste of money.
Also, an agent do not have a clear idea about your family medical history, etc. In such case, with wrong information provided, your application might end up getting rejected.
You forget to update your policy: In case of any major incident in your life, such as, marriage or childbirth, you should update your life insurance policy. You can always add or remove beneficiaries for your insurance cover and doing this can avoid a great amount of inconvenience that your family might have to face when they make a claim.