In recent times, protecting the financial well-being of your loved ones has become crucial. Having life insurance policies provides your family with a safety net, enabling them to maintain a normal lifestyle with financial security in the event of an unfortunate incident.
With online accessibility, purchasing life insurance has become easy and convenient. Although the process is quick, it has some drawbacks. In order to make a wise financial choice, you should steer clear of blunders that would affect your policy.
Here's an in-depth guide to help you avoid common mistakes and make an optimal choice.
Purchasing life insurance online is a fast and stress-free process. However, the convenience of electronic access sometimes leads to impulsive or uninformed choices.
To ensure your investment in a life insurance plan truly provides security for your loved ones, here are 8 financial blunders to avoid when purchasing a life insurance policy online:
1.Choosing Inadequate Life Coverage
The most common mistake is buying a policy with lower coverage solely to keep the premium low. Often, individuals fail to consider future financial needs, such as their children's education, loan repayments, medical emergencies, and the impact of inflation.
Lower sum assured may be affordable at present, but it can critically restrict your family's financial security in the future. Therefore, it is essential to calculate your insurance requirements accurately.
As a general rule, opt for a life insurance policy with coverage of at least 10 to 15 times your annual income, taking into account all your current liabilities and future expenses.
2.Postponing the Purchase of a Term Plan
Delaying the purchase of life insurance can be costly and risky. Many young adults delay purchasing a policy, thinking they are too young and healthy or that it's not necessary at the moment.
However, the reality is that the sooner you purchase, the less your premium will cost and the safer you will be in the future. Therefore, it is best to start early so that you can secure low premiums and be protected while you are healthy.
3.Opting for a Short Policy Term
To reduce premiums, some individuals opt for a shorter policy term, believing they won't need coverage in the later years of their lives. When your policy matures in your 40s or 50s, renewing or buying a new plan can be costly at that age, or it might not even be possible due to health issues.
So, consider a term that insures you at least up to the retirement age of 60 to 65. Thus, you will continue to be financially covered when you will most likely have dependents and financial obligations.
4.Providing Incomplete or Wrong Information
Hiding a smoking history or existing medical condition to get lower premiums might seem harmless, but it can result in a denied claim later on. The insurer is fully entitled to deny claims if the information offered was incomplete or false when the policy was acquired.
Therefore, ensure that you provide honest and accurate information when completing the online insurance application, particularly regarding your health and lifestyle.
5.Not Involving or Notifying the Family
Even if you have bought the best online term plan, it is of no use if your family is unaware of it. If they are unaware of the policy, how to claim, or who to contact, they may miss out on the benefits altogether.
So, once you buy life insurance online, let your nominee and immediate family members know about the policy. Clarify vital information to them, such as the insurer's name, policy number, and the process for making a claim.
6.Managing Too Many Riders or None
Riders such as accidental death benefit, critical illness coverage, and waiver of premium can enhance the coverage of your term plan. However, it may seem expensive to add all the available riders unnecessarily.
On the other hand, avoiding all riders can lead to missing out on benefits. Therefore, assess your personal and family requirements prior to choosing riders. Select only those that align with your health profile and financial objectives.
7.Not Comparing Policies of Several Insurers
Many buyers tend to opt for the first policy they find or stick with familiar brands without exploring other options. This may lead to missing out on improved deals that offer better coverage at competitive prices.
This is why you need to perform detailed research to compare various life insurance offers online, exploring many websites. Ensure that you compare the premiums, coverage, riders, claim settlement ratio, and policy term of different insurance providers to select your preferred one.
8.Cancelling an Old Policy Without Replacement
Few individuals cancel their previous insurance policy in anticipation of purchasing a new one, without actually obtaining the new protection beforehand. This could lead to a significant gap in coverage, particularly if your new application is delayed or denied.
This is why you should always wait until your new life insurance policy is issued before cancelling an old one.
After understanding the major mistakes to avoid when you buy life insurance online, it’s equally important to know the different types of life insurance policies available. Here’s a quick look at the most common life insurance plans:
Term Life Insurance: The term insurance is one of the most preferred forms of life insurance plans. It provides cover for a specific tenure (e.g., 10–30 years). In the event of the insured's death during the tenure, the nominee is paid the sum assured.
Whole Life Insurance: It protects you for life, generally up to 99 years. It offers both a death benefit and a cash value component, making it an ideal choice for long-term financial planning and protection.
Unit Linked Insurance Plans (ULIPs): This combines life insurance with market-linked investments. A portion of the premium gives life protection, and the remaining part is invested in funds of your choice. It is ideal for those seeking insurance that also promotes wealth creation.
Endowment Plans: They offer a combination of savings and insurance. If the policyholder is alive at the end of the term, a sum is payable. On death, the sum assured is paid to the nominee.
Money Back Plans: These plans yield returns at intervals during the policy term, in addition to life cover. This type of plan is suitable for those requiring liquidity periodically.
Child Insurance Plans: This plan is tailored to ensure a child's future with maturity returns linked to education or other milestones. It also combines savings and life cover.
Retirement and Pension Plans: This assists in creating a retirement corpus. At maturity, you can receive a regular income or purchase annuities to achieve financial independence after retirement.
Group Insurance Plans: These plans are provided by organisations to insure employees with a single policy, ensuring equal benefits at affordable premiums.
Purchasing life insurance online is a smart and easy solution for securing your family's future—but only if you do it sensibly. Avoiding these basic pitfalls ensures your policy is working as intended when it matters most.
If you're new to insurance or want to review your current coverage, being smart and proactive can help you avoid such mishaps. Protect your loved ones with a policy that fits your lifestyle, not just your wallet.