Life insurance helps you to secure the future of your near and dear ones. SO, it becomes imperative that you make your life decisions with care. In this regard, there are 6 mistakes that people generally commit. Here are those 6 mistakes and tips on how to avoid making them.
- Not buying when young
Many people keep on procrastinating buying insurance in the belief that they don’t need it now. Nothing can be farther from the truth. The younger you are , the lower are your insurance premiums. That’s why its necessary to buy a term insurance policy when you are young rather than putting it off for a future date.
- Buying the wrong type of insurance
This is the most common mistake that people commit while buying life insurance. For instance, without securing your family, if you go for buying a ULIP for tax-saving purposes would prove costly in the long run. Securing your family should be first priority. Post doing so with a term insurance plan, you can look at putting your money in return generating plans like ULIPs or endowment plans. The basic purpose of life insurance is to secure your family against the vagaries of the future.
- Depending only on your employer for life insurance
If you are depending only on your employers for life insurance, you are perhaps not planning properly for your life insurance needs. The employer-sponsored life insurance provides Sum Assured that is generally less than your need. Also, if you were to change employment or start a venture of your own, your would not be covered an more and buying life insurance afresh at that time may prove costly.
- Under insurance
Under insuring is something that most people fall for. To save on premiums or to pay more premiums for tax-savings, most people fall for this. They buy policies which promise more returns on the long-term and hence charge a higher premium. This results in a low Sum Assured for your family, which is not the ideal case scenario. You should be insured for at least 10 times of your annual income. This will ensure that when you are not around to provide financial support for your family, they have access to adequate funds to sustain themselves.
- Not reviewing your insurance policies
Not reviewing your life insurance policies from time to time is as good as not buying the right insurance policy. This is because your needs change over time and if you do not accommodate your needs and buy life insurance policies according to your changed needs, you are not buying the right type of insurance at the right time. Make it a point to revisit your life insurance policies regularly and make changes whenever you feel that your current portfolio does not service your need appropriately.
- Giving incorrect or impartial information
If you hide any significant details about yourself like you being a smoker or having hypertension, the same may result in the claim being rejected for concealment of material information. The contract between the insurance company and the insured is one wherein utmost good faith has to prevail. There should not be any concealment or wilful hiding of information. If you engage ins a hazardous pastime like mountaineering or hi-speed car racing etc, please disclose the same to the insurer.
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