1. Decision Making
People postpone the decision to buy life insurance for many reasons. People of 30-35 years do not understand the need to spend on this. The reason is that they do not see any threat to life. Experts say that the longer you do not buy life insurance, the longer the risk remains.
2. Not Taking Term Plan
In a regular term plan, the Sum Assured is paid to the nominee if the policyholder dies during the policy term. However, no maturity benefit is available if the policyholder survives the policy term. Most of the people do not take a term plan because of this. Most of the life insurance policies are taken by looking at the investment aspect with the insurance.
3. Hiding Important Information
Many people hide important information while buying a policy. These include pre-existing diseases, medical history in the family, smoking, etc. Concealment of such information or providing forged documents at the time of purchase of the policy may result in rejection of the claim.
4. Taking a Long Term Policy
Some insurance companies offer policies of 100 years or more. Experts ask to avoid such policies. In this, a higher premium has to be paid for the increased cover.
5. Buy Short Term Policy
Buying a policy for too short a term is also a mistake. Buying life insurance for 45-50 years of age can be cheaper. But, after the term of the policy is over, the risk comes on the family.
6. Select The Option of Return of Premium
In such policies, if the policyholder survives the policy term, the entire premium is returned. This might sound like a good deal. But, this is nothing but bait to trap the fish. In this you pay more premium.
7. Not Reviewing Life Insurance
There are many such phases in life when people’s responsibilities increase. Marriage or the birth of a child in the family are such stages. At that time the need for life insurance increases.
8. Choosing The Wrong Payment Option
Most life insurance policies come with different payment options. On the death of the policyholder, the payment is made to the nominee based on the option chosen. It is important to choose the right payment option.
9. Selecting Limited Pay Mode
In the regular payment option, premiums have to be paid annually for the entire term of the policy. But, you can also opt for ‘Limited Pay’ option. In this you have to pay only few years. Experts do not believe much about its benefits.
10. Family Not Knowing About The Policy
This is the biggest mistake made in buying life insurance. Some people buy the policy. But, the family members do not know about it. They do not get the benefit of it when needed. Therefore, not only should the family members be informed about the policy, but they should also be made aware of its features.