You can be a single parent, retired already, or recently married and about to start with your family planning; what is common between them all is the need for financial stability in the present and the future. Buying term insurance will not only help you secure your family’s future but also offer you tax benefits on your premium payments every year.
However, people often make common mistakes while planning their finances or buying a term life insurance policy, which must be avoided. Here are a few of the mostcommon mistakes that you must try and avoid:
- Planning To Buy Term Insurance At A Later Age
When you are in your 20s, buying a term life insurance plan might be one of the last things on your mind. However, buying an insurance policy early in life is one of the best decisions you can make. This is because you probably have just started earning at a younger age, are not physically and mentally strained yet, and might not have many responsibilities or debt to pay off.
This is like the golden time to buy a term insurance policy, as the earlier you buy it, the more savings and benefits you can get from the policy. Besides, even the best term plan will be affordable and have lower premium rates for you since there are fewer chances of having a major illness or medical history when people are still in their twenties or even thirties.
- Buying Term Insurance For A Small Tenure
Never make the mistake of buying a term life insurance plan for a 10 or 20-year tenure, especially if you are still in your twenties or thirties only. While it is best to buy term insurance early on in life, remember that you will need this cover the most when you retire because, at that age, most policy providers make buying a cover very expensive or refuse to give one altogether. Instead of renewing the plan every few years, opt for a longer tenure from the get-go.
- Keep A Tab On Your Rider Inclusions
There are various term insurance benefits you can avail of when you add riders to your policy. However, remember that while riders can enhance and customise the policy to suit your needs, you may not need all of them. Therefore, it is important to know the needs of your family before deciding on the specific riders you wish to add.
- Forging Details In Your Policy Or Hiding Health-Related Facts
Most people think that a small lie here and there when buying a term life insurance policy hurts no one. If you lie when buying a term life insurance policy, then manythings can go wrong for you as a policyholder, and you may not even be able to reap the benefits for which you bought the policy in the first place.
Moreover, your beneficiaries could even lose out on the lump sum they were to receive in case of your untimely death, and even worse, your policy can also be revoked by the insurance providers.
- Buying Term Insurance Purely For Tax Benefits
Often people have various insurance policies, but they go ahead and still buy a term life insurance plan simply to gain tax benefits against the yearly premiums they pay. However, against popular belief, you must not buy term insurance simply because it offers a tax deduction under section 80C, for premiums paid in a year.
While tax-saving is one of the benefits of a term insurance policy, it is not the core purpose of such plans. There are many other instruments out there that can help you save tax better if that is your only goal. However, if you buy term insurance, then you can enjoy the dual benefit of life coverage for your family’s future and tax benefits that are a part of it.
It is very important that you have a rational approach towards the whole process and do your due diligence when comparing insurers and different term insurance benefits. Be certain about the policy you want to buy, the insurance providers you want to buy it from and keep a checklist of these mistakes that must be avoided to help navigate you in the right direction.
