If you’re thinking about buying a life insurance policy, you must be in a state of utter confusion right now. But don’t worry, this confusion is obvious! For someone new and unfamiliar with insurance policies, finding the right type of policy can be a daunting task.
Purchasing a life insurance policy is not much different than shopping for any other product or service. When we purchase any commodity, we consider the ultimate task it will perform. Like when you book a deluxe hotel, your aim is to have a comfortable stay. In the same way, when you buy a life insurance policy, you want to provide financial security to your family.
There are different types of life insurance policies and one of the most popular types is the term insurance. Despite the fact that term life insurance is a preferred option, people end up making some common mistakes. So, to save your time and money, here we’ll talk about term insurance plans and mistakes that you need to avoid.
What is Term Insurance?
Term insurance is a type of life insurance policy that provides coverage for a specified period of time such as 10, 20, or 30 years. If the policyholder dies during the time period specified in the policy, the nominee will be given the returns of the policy. As compared to permanent life insurance, this policy is more affordable. However, if the insured person outlives the tenure of the policy, there’ll be no death benefit given at the end of the term plan.
Whether you buy permanent life insurance or a term policy, once issued every policy is considered a “done deal” which means you need to avoid some mistakes at the time of application. So, here are the 5 mistakes that must be avoided while buying a term plan.
- Choosing a Short Tenure
Just to save a few dollars, people often choose shorter term coverage. However, when you do this, you forget that a term insurance policy does not benefit if the policyholder outlives the policy tenure. Maybe, you get a ten-year plan and by the end of that period, you have some medical issues. In that case, your cost for the next plan will increase considerably or maybe you can’t even get coverage at all. Ideally, you should calculate the time period based on when your kids will be heading off to college and living on their own.
- Choosing Insufficient Cover
Another common mistake is buying an insufficient cover to replace your income. According to financial experts, you should get at least ten to twelve times your income in life insurance coverage so that your family will be able to survive in case of your sudden absence. If you’re the primary source of income in your household, you need to make sure that your coverage will allow them to live comfortably.
- Not Purchasing at the Right Time
Many people pay attention to the need of buying life insurance at the later stages of life. However, when you do this you don’t realize that you’re putting the financial security of your family at risk. The cost of the premium of term life insurance increases with your age. This is because as you grow older, you become more vulnerable to develop health issues and even become ineligible to purchase a policy.
- Not Reviewing Your Term Insurance Policy
As your children grow older and your lifestyle changes, the coverage that was right 10 years ago may not work for you now. People think that once they have purchased a policy there’s no need to look back at it. But as a smart policyholder, you should always review your term life insurance policy to make sure that it meets your changing needs.