Insurance is a risk management technique and we may consider it as a necessity to live a hassle-free life. Everyone is exposed to financial hardships but many of us ignore this fact assuming, “let go and let God work!” Are you one of them? If yes! Then don’t forget “God helps who help themselves.” Always have faith in God and hope for the best; but on the contrary, always ready for the worst. Having an insurance policy provides you peace of mind that you’re ready to face any unforeseen event of medical emergency or in the event of your demise your family can survive without you. It is indeed that having an insurance is very important but something is more important then an insurance policy and that’s, buying a right policy that fulfils your insurance needs. A right insurance policy can save your money. Being over-insured puts burden on your pocket and being under-insured does not give the benefits that you supposed to get from it. We also have seen a common dilemma among policyholders that “what do their policies cover and don’t cover?” Such dilemmas are indications that they (policyholders) have bought the policies without knowing the benefits offered by them.
At IlaInfo, we endeavor to help policyholders to opt policies that really meet their needs. In this tutorial, we have listed a number of things that most of the policyholders ignore at the time of purchasing a life insurance policy. These mistakes can become the cause of claim denials. Scroll down and read following mistakes that you should avoid when buying life insurance plan.
Delaying Life Insurance Purchase
You might have many reasons to have a life insurance policy and you probably have decided to buy one. However, like many others you would be delaying for it. I also did the same, I used to say myself “that tomorrow I would certainly buy life insurance cover,” but that tomorrow never came and I took a long time to buy an insurance cover (Sigh. I would have paid more). Not insuring yourself at earlier has two drawbacks; it costs more, and you stay uncover (Who knows when an injury or death going to knock someone’s door?).
If you buy an insurance policy as earlier as possible then premiums rates reduce significantly than you buy the same plan after some years.
Choosing Wrong Policy
As I discussed earlier, choosing a right policy is more important than buying an insurance policy. Therefore, before buying a life insurance cover list down your insurance needs. Ask yourself questions related to insurance like why do I need insurance cover? How can I buy best life insurance cover? How much cover should I have? What should be the term of insurance? Do I need to add riders for extra coverage? What are the different types of life insurance? While answering these questions consider both your present and future needs.
Generally, insurance cover should be 10-20 times of your annual income. Let’s say John wants to buy an insurance cover and he earns 12 Lakhs annually. In this way, he should have insurance cover ranging from 1.2 Crore (10*12 Lakhs) to 2.4 Crore (20*12 Lakhs). However, real insurance cover depends on your current and future financial needs.
Buying Insurance on Your Own
Choosing a best life insurance policy is not a rocket science. You just have to analyze your insurance needs by considering your present and future conditions. However, in our guide “how to choose best life insurance cover?” we have strongly recommended an expert’s advice because they’re professionals and they better know how to invest in best life insurance policy.
Ignoring Insurance Comparison
To save few bucks, we check products prices on every e-shopping website before adding them to our carts. But we forget this important thing when we buy insurance products; in whom we invest a large portion of our income. Insurance marketplace is emerging very rapidly around the globe and many new public and private players are offering lucrative offers to attract new customers. Therefore, before buying an insurance policy, visit some insurance comparison websites and compare insurance products to save your money. There are huge possibilities that you could find an insurance product at reasonable price.
Extras: While comparing insurance products don’t only focus on price, look at the policy features. A low cost policy may offer you less benefits.
Missing Online Options
In this era of internet and technology, everything is available at our fingertips. Many insurers sell insurance products online. You can visit an insurer’s website, from whom you want to buy your cover, to check different products offered by him along with prices. Buying insurance online is more reliable because you buy it directly from the insurer not through a mediator but an educated insurance agent guide you better to pick a best policy; if you’re uncertain.
Not Checking Registration of Insurance Company and Agent
There are some insurance regulatory authorities out there who monitors insurance companies to reduce chances of missellings or frauds. Therefore, barely someone can perform fraudulent activity. However, you can take some precautions from your side to make sure you’re dealing with a genuine insurer and agent. While buying an insurance policy, check registration of the insurer by visiting concerned authorities’ websites (who regulate insurance sector in your region) like IRDAI (Regulatory and Development Authority of India) who regulates insurance sector in India, it regularly publishes list of registered life insurance companies, health insurers, and non-life insurers on its website.
Also, don’t forget to check license of the agent. If he or she does not acquire a valid license then don’t buy insurance policy from him or her.
Not Asking Questions
While purchasing a land or home, we ask countless questions from sellers such as why are you selling it? Who is the real owner, are you? Bla! Bla! We ask all these questions to make sure we’re going to indulge in a legal contract. Insurance is also a legal contract therefore treat it in legal manner. Ask as many as questions you can (oh! Related to insurance only). If you’re buying a life insurance with investment component then also ask about various risks, number of switching allowed in a year, charges for managing investment portfolio, and surrender value etc.
It is very common in India that often people buy insurance through a relative, who is an insurance agent, without knowing, “what does the policy cover and doesn’t cover?” There’s nothing wrong in buying an insurance through a relative but the problem is without knowing anything about the policy you’re ready to pay premiums.
From whomsoever you’re buying a life insurance, check agent license and ask questions on premiums, term of insurance, benefits, surrender value (if any), waiting period etc.
Read terms and conditions
Become an Analytical Buyer, who carefully and thoroughly reads all terms and conditions of a contract without assuming anything, while buying an insurance policy. Though insurance is a legal contract between two parties (insurer and insured) therefore in such a contract all terms, conditions, duties, and liabilities should be clear and transparent.
Before filling out proposal form, ask for policy brochure and read it thoroughly without any rush. Take your time to read it. You may also request your insurance to send policy brochure thorough email or post. Some insurers provide such documents on their websites; therefore, you can visit your insurer’s website.
Not Filling Out Proposal Form Personally
Fill proposal form yourself and disclose all facts clearly and truthfully as asked in the form. Insurance works on the principle of utmost good faith therefore disclose all facts clearly, so in future you would not face a claim refusal. Any party can cancel the contract if anyone violates the contract for example, if insurer has not disclosed terms and conditions clearly then policyholder can cancel his or her contract, within free-look-period (usually 15 days), after receiving the policy documents. On the other hand, insurer can also refuse to provide insurance cover if insured has concealed important information asked in the proposal form.
Don’t forget to keep a copy of proposal form. It can help you if you refuse to take insurance cover from the insurer.
Insurance Is Not an Investment
Insurance is a purely risk management technique; in which you invest to tackle any unforeseen event. The sole purpose of an insurance product is to provide financial aid in the event of loss; not to enhance earnings or assets. Yes! Some insurance products such as Unit Link Plans, give you some part of your invest as returns at the time of maturity. But if you’re looking for an investment option then you’re on a wrong place. Buy insurance cover to tackle with future mishaps. If you want to invest your money to complete your future financial goals then explore other options such as SIPs (Systematic Investment Plan), equity funds etc.
Having an insurance cover is very much essential in today’s life in which we’re continuously exposed to different risks. While buying an insurance cover don’t ignore above mentioned points.
Joke: Buy insurance cover to stay well because true prayers of your insurer won’t let you die.