Mistakes to Avoid While Purchasing Life Insurance Policy

A life insurance policy is one of the most important financial instruments that you must invest in. Today, the number of people buying a life cover has increased substantially, thanks to the growing awareness levels. But, many people either don’t have a life cover or are unhappy with their life insurance plan.Not buying the right plan to suit their needs or opting for a lower cover is a common reason behind the disappointment. Therefore, if you are purchasing life insurance, you must avoid the following common mistakes that people commit and ensure that you get the right policy to suit your needs.

One of the most common mistakes people make while purchasing life insurance is treating the policy as an investment and protection vehicle. Today, different life insurance policies like the endowment plan and ULIP provide an investment opportunity.If you are a first-time insurance buyer, it is recommended that you buy a term plan rather than an investment-linked policy. The term plans allow you to get higher coverage at a lower premium. Thus, you can divert the money saved into more attractive investment options such as mutual funds.

The claim settlement ratio or CSR of the insurer shows the number of claims the insurer has successfully settled in a year against the number of requests received. A higher CSR indicates the efficient underwriting process of the insurer. It also means that the insurer has settled a high percentage of claims. The higher the CSR, the better your chances of getting your request approved.

Often, many first-time insurance buyers tend to hide certain health-related information to get the policy at a lower price. But, this is a serious mistake that you must avoid. Remember, during claim settlement, the insurance companies conduct a thorough check of the information you provide in your application form. If they find any discrepancy, they may reject the claim on the grounds of policy terms violation.This can cause serious financial hardship for the family. To avoid such a situation, you must provide accurate details and fill all the sections to the best of your knowledge.

Many first-time insurance buyers tend to buy the first policy that they see online only to realise later that a policy from different insurers offers better benefits at a lower price. So, if you are short of time, you can compare the various plans on aggregator sites and choose the best plan to suit your specific need.Know your needs well, and then start comparing the plans, and you will surely find one.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.