Last Updated:July 05, 2025, 12:00 IST
Opting for a low sum assured and not sharing important health-related information are some of the mistakes to avoid while buying a term plan.
Buying term plan? Try avoiding these mistakes.(Representative Image)
A term insurance plan is a form of life insurance that provides coverage for a specific period. The tenure of the policy is referred to as the policy term.
It is one of the convenient ways to ensure financial well-being for your family. If the policyholder passes away during the policy term, the family receives a lump sum amount. It ensures financial security.
With numerous options available, it is easy to make mistakes that could reduce the effectiveness of your policy. Here are the key mistakes to avoid when buying a term plan.
Five Mistakes You Must Avoid While Buying A Term Plan
1. Not Assessing Your Coverage Needs Properly
One of the most common mistakes is choosing a term plan without calculating the right coverage amount.
Many people opt for a sum assured that’s too low, leaving their families inadequately protected. A general rule of thumb is to have coverage that is 10 to 15 times your annual income, factoring in inflation, outstanding loans and future expenses like children’s education.
2. Focusing Only on Low Premiums
Many buyers are attracted by term plans with the lowest premiums. While affordability is important, opting for a cheaper plan could lead to a compromise on coverage, riders or the insurer’s reliability. A low-premium plan might not offer the flexibility or benefits you need in the long run.
3. Not Sharing Complete Information On Medical History And Lifestyle
Some policyholders withhold details about health conditions, such as diabetes, or habits, such as smoking or alcohol consumption, to secure lower premiums. It can lead to claim rejection later as insurers verify details during the claim process.
Thus, you must be honest about your medical history and lifestyle during the application process. Even if it increases your premium slightly, it ensures your family can settle claims without disputes. For instance, if you are a smoker, declare it upfront to avoid complications later.
4. Not Comparing Term Plans Offered By Different Insurers
Many people rely solely on insurance agents or traditional channels for buying a term plan. But by doing this, they miss out on better deals available online.
It is important to compare the terms and conditions, coverage and premiums for different plans to decide which suits you the best. You can go online to research and compare term plans across insurers.
5. Not Reviewing The Policy Regularly
Major events, such as the birth of a child, marriage or taking a loan, can drastically alter your financial reality. Many policyholders buy a term plan and forget to review it. This leaves their coverage outdated. Ideally, you must reassess your term plan every three to five years or after major life events.
To conclude, buying a term insurance plan is one of the best things you can do to secure your family’s future. By avoiding mistakes such as underestimating your coverage requirements, you can ensure your policy protects your loved ones.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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