Avoid these insurance related mistakes

We list four common insurance-related mistakes that one may make, resulting in the purchase of an unsuitable policy.

That one must buy insurance in today’s uncertain times is a given. However, the potential to make several mistakes while buying life insurance is immense. The reasons are varied – from lack of information to deliberate concealment of facts – and they can all result in you buying the wrong insurance policies.

Broadly, the following are four common mistakes most buyers make when taking insurance:

1. Equating insurance with investment. Most people (mistakenly) equate inssurance products with investment products. At the outset, let us establish that insurance cannot be viewed as an investment – it is expected to primarily provide protection, not function as an investment option. If you want high returns, pick such investment options as ELSS, mutual funds, etc.
2. Looking only at getting the premiums back. The reason many people sign up for expensive or unsuitable insurance products is that they wish to have a maturity bonus, at which point they can get all their paid premiums back. While this may work towards fulfilling some financial goals, it may result in you buying a plan that you don’t need or which is too expensive. It also leaves you vulnerable to future financial uncertainties, because you may pick a policy whose sum assured is not commensurate with the family’s needs. Instead, it is better to buy a term plan online – you pay lower premiums and get a high sum assured, which can take care of your family in the future.
3. Taking inadequate coverage. Depending only on office-provided insurance is a big mistake. The insurance plan given by the place of work is often insufficient to meet your family’s future needs. Or you might be tempted to pick a low premium plan – with a low sum assured – simply because it is more affordable. Hence, it is a wiser move to buy a term plan – it provides a large amount of money as sum assured, which can safeguard your loved ones.
4. Falsifying information. Insurance companies take down information about the potential customers as regards their health profile, age and other data. Some customers are tempted to provide incorrect information to get lower premiums and higher coverage. For example, a smoker might attest to be a non-smoker so as to get a lower premium. Or a 35-year-old might try to pass off as 25-year-old to get more coverage. However, falsifying information never works – insurers conduct rigorous checks and incorrect data is flagged down at once. It might also result in the termination of the policy.