Many of you have been asking me on which insurance plan is best based on some of my reviews before. Though I might have missed some of your mails/comments, here comes an easy guide to follow while buying insurance. My analysis reveals that most of the young folks who just started their career are the ones who ask these kind of questions. They are the most confused souls and most of them will be in the cross roads when it comes to tax planning. With little knowledge, they try to save tax by purchasing some insurance, that too towards fag end of the financial year. Though on one hand, it is encouraging to hear that the young minds are thinking of early financial planning, choosing the right modes to invest makes all the difference. One of the most common mode that comes to such an individuals mind towards saving tax is always insurance. Let me repeat the golden rule – Don’t just invest for the heck of saving tax.
In this post, let me point out some of the common mistakes that people commit while purchasing life insurance. If at all you are planning to buy a life insurance policy, think twice before finalizing the plan. If you do this in a hurry based on insurance agent’s recommendations, you would just sign up for anything which is offered to you thinking of tax saving in mind. Read an excellent article on knowing whether you are investing in the right manner. Most of the times, even sign up for a plan blindly on any form they give you. It is very important for you to cross check everything and then make the first payment. Read the following tips before taking up any plan and hopefully this will answer most of the questions you folks have been asking. This is not only for the young folks but should be useful for all those prospects who are looking at buying life insurance.
- Evaluate your life insurance requirements & know liabilities/risks.
- Invest some good amount of time on researching about various life insurance plans, additional benefits & riders. Always compare similar plans from various insurance companies.
- Think of term insurance as your first choice among rest.
- More importantly, understand the extent of insurance cover required along with exclusions if any for a given insurance plan.
- Don’t rely on your agent to fill the insurance proposal, always do it yourself. Be truthful while filling the form as you or your nominee could lose the benefits from the policy in case any fact is misrepresented. Don’t ever provide your agent with a signed blank form.
- Some of the agents do lay a good trap by offering to pay the quarterly equivalent of annual premium certain policies in the first year. Simply don’t get fooled by these tricks, always look at the long term benefits.
- Another common mistake that people tend to do is that, they misrepresent some of the facts like age, health, family history, etc. Never alter medical facts as it can make the entire policy null and void. Your Insurance agent may advise you to misrepresent medical facts to help decrease the premium amount. This is never a smart thing to do! In the event of a claim, the misrepresented facts will come up & will be detected by claim settlement folks.
After all these, there is one final golden rule to abide by if you wish to reap the best out of insurance plans. If at all you get to hear any of the keywords mentioned below from your insurance agent about a particular plan, it is a certainly a red flag!
My best bet is always to go for a term insurance plan that gives the maximum cover on the premium paid. After this, you can choose to invest in other modes apart from insurance to fit your financial planning.