The first thought that comes to everyone’s mind after earning is financial planning. In that case, securing the future of the family as well as oneself becomes one of the main goals. And for future financial security and goals we choose different investment options. And one of these is term insurance or term insurance. Because let’s say the insured dies suddenly, the financial security of his family will be in question. And at that time this insurance plan will help to meet the financial needs and financial goals of the insured’s family.
However, most of the people make various mistakes when it comes to this term insurance. However, in order to avoid those mistakes, experts say that five important things should be emphasized. According to a report by Moneycontrol in this context, Mahabir Chopra, founder of Beshak.org (Beshak.org), says that most people make some common mistakes while taking term insurance. As a result, the family of the policyholder does not get the full benefit of the term insurance. So he also said that there is a need to be careful of such mistakes while taking term insurance. Let’s take a look at the five common mistakes that should never be made while taking term insurance.
Not being able to choose the right amount of insurance coverage:
There is a general rule for how much term insurance should be taken. The rule of thumb is to take term insurance coverage that is 20 times your annual income. However, term insurance calculated from this formula will be sufficient, but not necessarily so. This is where most people go wrong. In fact, they do not understand how much term insurance should be taken. To calculate the amount of term insurance coverage the investor needs to calculate the total investment amount. Add together the amount needed to meet expenses, long-term financial goals, debt and other financial commitments. After that, the investor has to take term insurance coverage according to the amount that will come after deducting the other from these two amounts.
Choosing the wrong claim pay-out option:
Choosing a claim pay-out plan is very important while taking a term insurance plan. A claim pay-out plan is the way in which the insurance company pays the insured’s family. One month payout, monthly income payout option and single lump sum and monthly income payout options are available. But many people make the mistake of choosing this payout option. As a result, it becomes difficult for their families to get claim money in the future.
Many people do not opt for the add-on option while taking a term insurance plan. These are called riders. And this is another common mistake that insurers make. In this case, in certain circumstances, additional money is paid to the policyholders in the form of claims. That is, add-ons are provided by the insurance company in case of accident, critical illness, accident and any emergency. While taking out term insurance, one should choose the rider according to their needs.
Choosing a term insurance company based on claim settlement only:
While choosing a term insurance company many look at the claim settlement ratio of that company. But this is not the correct method at all. Because many people think that a company with a good claim settlement ratio means that the company’s service will also be great. But that may not be the case. There are many companies who settle small claims and improve their claim settlement ratio. However, their track record for large settlements may not be as good. So one should choose a term insurance company only after looking into all aspects.
Omissions in filling the proposal form:
Many people do not want to fill this proposal form while taking term insurance. Many people fill the form with their family members. But it should not be done at all. In fact, before taking term insurance, it is always necessary to read the proposal form carefully and fill it only then. Because any mistake left in the proposal form can cause problems in future.
Tags: Investment Tips