Life has many uncertainties, and the future is hardly predictable. If you have dependents, you have the responsibility of providing protection and financial security just in case you are not around. Death can interfere with different aspects of family support, but a term insurance plan is beneficial and could prove adequate as a backup plan for when that time becomes a reality. Insurance plans come with different pitfalls, and when choosing your next term insurance plan, here are five tips to consider to avoid those pitfalls.
- 1.Be Sure to Choose Your Policy Wisely
It is essential to understand a policy before making a purchase. Term insurance provides coverage for a specific term, like 10, 20 or 30 years. You should know exactly what term coverage entails, the premium paid on the policy you plan to acquire and whether or not it has a cash value. Before signing on the dotted line, ensure that the term plan that you choose is right for your needs. Ask questions about the policy to get clarification or if you simply need to be informed.
- 2.Careful Not to Buy Too Little Insurance
A $200,000 term insurance policy may appear to be a large sum for life coverage, but a sufficient policy is one that meets all your financial needs. There can be huge debt after your death that your loved ones will be responsible for covering, such as mortgage, car loan, student loans, and other expenses such as medical bills and your kids’ tuition. A policy that will suffice is one that will be solvent and cover all debts and other financial obligations. Deliberately underinsuring could prove costly and burdensome for your loved ones. Find out more about cost using term insurance premium calculator.
- 3.Perform Periodic Reviews of Your Term Policy
In the case of a major life event, like marriage, you should perform a thorough review of your insurance needs. The policy you purchased 10 or 15 years ago may no longer be sufficient for your financial obligations. That is why it is important to review your term policy as you go through different stages in your life. If you realize that you need more coverage at a certain point, you can make the necessary adjustments.
- 4.Do Due Diligence on Insurer
There are many insurance agents out there, offering a host of different policies and sometimes what they are offering is just too good to be true. Do your homework on the insurer that you are interested in doing business with to know if the insurance company is licensed and is in good standing. The Better Business Bureau is a good place to gather such information about an insurer. If you don’t, you risk wasting your money on a policy that may be useless when needed by your family.
- 5.Remember that Term Insurance Runs Out
Keep in mind that term insurance runs out and/or becomes prohibitively expensive to carry. It only lasts for a predetermined period of time and then coverage ends. While term insurance requires a lower outlay than whole life insurance, it is only inexpensive compared to what it can accomplish for your financial security goals. If your need is short term, then term insurance is appropriate.
When purchasing term insurance, there are certain pitfalls that you should try to avoid. You want to choose the best policy that is sufficiently adequate to meet your needs and be beneficial for your family in the long run.
About AEGON Life
A joint venture between AEGON – world’s leading financial services and Bennett, Coleman & Company – India’s leading media house, AEGON Life Insurance launched its pan-India operations in July 2008. Armed with a vision to be the most recommended new age life insurance Company, AEGON Life adopts the power of global expertise by leveraging digital platforms to bring transparent solutions, and to prioritize customer needs. Our financial planning and investment solutions include term life insurance plans, pension plans, unit-linked insurance plans (ULIPs), health insurance plans, child education plans, and more.