Do not make these 6 mistakes while taking life insurance in 2021

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Life Insurance Buying Tips Many smart people make the biggest mistake by not giving complete information. They feel that they know what to disclose and what not to disclose while buying a life insurance policy.
New Delhi, Anoop Seth. Many times financial mistakes ranging from lapses in budget preparation to inadequate planning for any emergency even by financially knowledgeable people can lead to financial mistakes. It is not wrong to make a mistake. However, the process of self-identification and learning is the best way to learn the financial management that suits you. However, life insurance is an instrument that has a small margin of error. The brunt of this mistake has to be borne by the people dependent on the policyholders. Life insurance as a risk management tool protects the financial interests of your loved ones when you are no more. In such a situation, it is very important to avoid any kind of small or big mistake in this matter.
In such a situation, what are the common mistakes made with life insurance and how can these mistakes be avoided by buying insurance with all the precautions? Let’s take a look:

Table of Contents

1. Mistake of not buying term insurance

People put a lot of emphasis on increasing their money and buy life insurance for wealth creation and investment. They refrain from buying a term plan, arguing that insurance products linked to existing investments also offer life cover or they have accumulated a substantial amount through other instruments.
However, what most people do not realize is that the basic goal of a term plan is to help financial sustainability without affecting financial stability. Your investments are generally tied to goals like children’s education, retirement, etc. Hardly any person creates any fund for the financial continuity of his family. In such a situation, if some people are financially dependent on you then term plan is not optional.

2. One solution is not right for everyone

Life insurance is a long term solution. In this, there is hardly any direct benefit to the policyholders as it is bought for the people dependent on you. Due to the lack of immediate benefits, people ask for ‘more’ while buying life insurance. People make the mistake of linking multiple goals into one solution over and over again. This reduces financial provisioning. It is important to remember that life insurance covers the financial needs associated with the crucial stages of life. In such a situation, the mistake of taking only one instrument for all the goals should be avoided as it can derail your life in the coming time.

3. Mistake of information hiding

The biggest mistake many smart people make is by not providing complete information. They feel that they know what to disclose and what not to disclose while buying a life insurance policy. In this entire buying process, the underwriting related to the individual’s risk profile (financial and medical) is of paramount importance. People do not give complete information to avoid increase in premium. Due to such mistakes, insurance companies reject the claim. This defeats the whole purpose of buying the policy.

4. Family not knowing

The biggest mistake is not to inform your dependents about your financial decisions. The real purpose of buying life insurance will not be served if the people dependent on you do not know the details of your policy.

5. Life Cover Review Is Important

Life insurance is a long-term instrument. People generally feel that once you buy, your purpose is served. However, as you go through different stages of life, the financial constraints of your life also change. That is why it is important to review your life cover. It is necessary to do this at least once a year.

6.Comparison of Instruments

One of the biggest mistakes smart people make is comparing insurance and other financial products. For example, fixed deposits are often compared to guaranteed insurance plans. However, the purpose of FDs and guaranteed plans is different. One of these is a savings product while the other is a wealth creation solution. Similarly, ULIP is often compared with SIP. These two cannot be compared as they both have different purpose and both have their own advantages and disadvantages.
Every financial decision has a goal and in case of life insurance the objective is clear – to protect the dreams and aspirations of your family. To avoid any kind of lapse, one should ask oneself that how can I continue the financial continuity of my family without any trouble. When you are in a position to answer this question, everything will be done in the right way.