10 Mistakes to Avoid While Buying a Term Insurance Policy

In addition, ignoring the online options or neglecting riders is also a term insurance buying mistake. Read on to know more about the common mistakes and how to avoid them:

Common Mistakes to Avoid When Buying a Term Insurance Plan

Let's take a look at the most common mistakes people make while purchasing term insurance plan and understand how to avoid them:

Buying Insufficient Coverage

A primary purpose of term life insurance is to provide financial stability to your family in your absence. If the sum assured is inadequate, your family may struggle to maintain their standard of living. Your coverage should be at least 10-15 times your annual income to ensure long-term financial security.

Note: Before buying, calculate the term plan premium using the Policybazaar term insurance premium calculator online tool.

Delaying the Purchase

Delaying the purchase of a term plan leads to higher premiums. The best time to buy is when you are young and healthy. This way, you lock in lower prices and get better protection for many years. If you wait until you are older, it will cost more, and you might not qualify for a plan if you have any health-related problems.

Choosing a Shorter Policy Term

This is a common mistake people make while choosing a term plan. Shorter policy terms may seem cheaper, but can lead to problems later. For example, if you buy a 20-year term plan at age 25, your cover will end by age 45. After that, buying a new policy will cost much more due to your age.

At 45, when you already have other financial responsibilities, the higher premium can feel like a burden. That's why choosing a longer policy term is better from the start. Don't go for low premiums for 10 or 20 years. Choose a term that at least covers you till retirement, or even beyond, for better peace of mind.

Providing Incorrect or Incomplete Medical Information

When purchasing a term plan, it is important to fully disclose all necessary information, including medical history, lifestyle habits (such as smoking or drinking), and existing health conditions, to your insurance provider. While not disclosing a health condition may result in a lower premium initially, if an undisclosed condition causes your death, the insurance company has the right to refuse the claim, creating a very undesirable situation for your grieving family during a crisis.

Adding too many Riders or No Riders

While riders enhance coverage, adding too many can make the policy expensive. Evaluate whether you need additional benefits like critical illness or accidental death riders before including them in your policy.

Ignoring Online Insurance Options

Many people prefer traditional offline methods but often miss out on cost-effective options available online. Buying term insurance through an IRDAI-approved web aggregator can help compare multiple policies, ensuring better coverage at lower premiums.

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Not Comparing Policies from Different Insurers

Many policyholders buy insurance from familiar companies without comparing other options. Exploring different insurers can help you find better coverage at competitive rates. Always compare plans, features, and claim settlement ratios before deciding.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.

Falling for Low Premium Traps

Some insurers attract customers with low premiums but include hidden exclusions. Instead of focusing solely on affordability, ensure the policy offers comprehensive coverage with minimal exclusions and a high claim settlement ratio.

Cancelling an Existing Policy Before Getting a New One

Switching policies without a proper plan can temporarily leave you uninsured. Always secure a new policy before discontinuing an old one to avoid gaps in coverage.

Not Reviewing the Plan T&Cs and Details

One of the most common mistakes to avoid while buying a term insurance plan is not reviewing the plan details carefully. It is important that you understand the plan coverage, T&Cs, add-ons, and available discounts, claim settlement ratio, etc., before deciding if the plan suits you or not. In case you ignore all these things, in future you may want to terminate the plan and opt for buying a new plan, which may be expensive.

Note: Know what is term insurance first and then buy a term plan for your loved ones.

Wrapping It Up

Avoiding these common mistakes can help you choose the best term insurance policy tailored to your needs. By opting for adequate coverage, comparing plans, providing accurate details, and reading policy documents thoroughly, you can make a well-informed decision that benefits your family in the long run.

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