Mistakes to avoid while buying life insurance plans
Doing a through due diligence before buying a life insurance policy is necessary to avoid any surprises later on. Here are some common errors which you should be mindful of.
Mar 2023
4 mins read
Share:
While the awareness about securing one’s life through insurance has increased post Covid, we have a long way to go. A large section of India’s population is still uninsured. India’s insurance penetration (premium as a % of GDP) stood at 3.2% in FY 2021-22.
Even those who have an insurance tend to be underinsured and lack awareness about how to go about choosing a life insurance policy for themselves. For instance, some fail to disclose important facts while purchasing coverage, leaving claims open to rejection by the insurer. In some cases, family members are unaware of the policy's existence!
Let’s look at some of the most common mistakes consumers make when purchasing life insurance.
Putting it off for later
Individuals put off purchasing life insurance for a variety of reasons. Young adults aged 30-35 do not see the need to buy a life insurance policy with no apparent risk to their lives. Such misconceptions have been dispelled by the pandemic. The longer you go unprotected, the more exposed your family becomes. Also, postponing the decision will not save you any money as premiums are linked to your age and other health factors.
Hiding vital information
Many claimants are learning the hard way that insurers reject claims if they discover that the policyholder fails to disclose critical facts while purchasing the policy. These can include any pre-existing medical condition, a family medical history, and harmful lifestyle choices such as smoking and working in dangerous vocations. Hiding such information or providing fake documentation at the time of purchase may result in the claim being rejected. Since the outbreak of the pandemic, insurers have been even more attentive and stringent. It is also advisable for consumers not to skip the medical exam.
Opting for a short term policy
Purchasing coverage till the age of 45-50 will leave your family with little buffer once the policy expires. A policy should preferably protect you until you have met all of your financial obligations and have paid off all of your debts. Family responsibilities like planning for children's higher education and marriage are of highest priority for most people in their 40s and 50s. If the breadwinner passes away during this phase, the family may be exposed.
Not reading the fine print
A life insurance policy comes with many terms and conditions. One should read the terms related to premium payment terms, policy revival, grace period, exclusions, waiting period for critical illnesses covered, and so on. This will help you know what you are signing up for.
Insufficient life cover
Choosing the right cover is essential to protect your family. Choosing a life cover which cannot cover the expenses of your dependents will strain your family’s finances. The thumb rule is to have a life cover of 10-15 times your annual income. For instance, if your annual income is Rs 20 lakh, you should ideally have a cover of Rs 2 crore.
Not involving family member
Many a time, people purchase a life insurance policy and fail to keep their family members apprised about their finances. If your family is not aware about the policy, it defeats the purpose of buying an insurance. Keeping your family informed about the insurance, its benefits and coverage will ensure that your family is able to claim the policy when it is due.
We hope the above insights will help you choose the right insurance plan which suits your goals.
(Source: Financial Express)
(Source: Financial Express)
Share:
PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC)
on the basis of publicly available information, internally developed data and other third-party
sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information,
assure its completeness, or warrant such information will not be changed. The information contained
herein is current as of the date of issuance* (or such earlier date as referenced herein) and is
subject to change without notice. The AMC has no obligation to update any or all of such
information; nor does the AMC make any express or implied warranties or representations
as to its completeness or accuracy. There can be no assurance that any forecast made
herein will be actually realized. These materials do not take into account individual
investor's objectives, needs or circumstances or the suitability of any securities,
financial instruments or investment strategies described herein for particular investor. Hence,
each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard.
The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein.
The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of
the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.
