Term insurance is often bought as an obligation, while in reality it must be treated as a necessity. Those who do not have sufficient knowledge of the underlying benefits of term insurance, either end up not having one or making an uninformed decision regarding their investment. But the fact is that term insurance must be purchased with proper reasons for investment and after a thorough analysis of your requirements. However, most people have enough immature reasons to buy term insurance and often fail to reap the optimum benefits of the same.
Here are six such immature reasons for buying term insurance:
Insurance Agents Are Pushing You to Buy Term Insurance
We all know someone who is into insurance sector. They might be your relative, friend, and friend’s friend who is pushing you to buy term insurance. Do not fall for this if you are unsure of the insurance product they are pitching to you.
You must not purchase insurance just because your friend or someone you know wants you to buy one so that they can earn a commission. You must analyse the product and understand the features before investing your hard-earned money.
Buying Term Insurance Just Because Your Colleague Bought It
Another big mistake people make while buying term insurance is copying their colleagues or friends who bought term insurance before them. Yes, term insurance is a necessity, and everyone must have one, but every individual has different financial aspirations and goals and coping anyone else’s decision will leave you in a mess after a certain point.
There are various policies available in the market, and it is essential that you choose the best term insurance plan that suits your financial goals. Meaning, you must take into account your as well as your family’s future goals into account while deciding the sum assured (cover amount) of this insurance.
This will make sure that your goals like funding your child’s education, their marriage or even their start-up will not be a distant reality in your absence. Insurers like Future Generali provide online calculators to help you calculate the coverage amount and premiums within seconds. Make use of such calculators to buy the right product instead of copying your colleagues.
You were Offered Term Insurance at A Lower Premium
Often there are companies which provide term insurance at a lower premium to their employees. This might seem a good opportunity to invest in term insurance, but you must understand that lower premium means lower coverage.
Your company might provide term insurance at a lower premium but the coverage your family member would get after your demise might not be sufficient. Since every family has different kind of lifestyle and expenses, similar term insurance cannot cover that for every family. So, if you do not want your dear ones to get into financial crisis after your demise, you must buy term insurance that does justice to your lifestyle and expenses.
Buying Term Insurance Without Proper Planning
If you are buying insurance for covering your increasing expenses and ensuring your family’s financial security in your absence, you need to invest with proper planning. Term insurance is undoubtedly one of the best gifts you can give to your loved ones, but you need to buy the coverage at the right time so that even in your absence your family can pay off any loans left behind by you and fulfil their financial needs.
Buying Term Insurance for the Sole Purpose of Saving Tax
People often buy term insurance to get a deduction on their income taxes. It is evident that when you buy term insurance, you will get deductions, but you must not buy this insurance just for saving tax. If you are purchasing a wrong policy to save tax, you might lose more money than your taxes.
Hence, while buying term insurance, you must analyse your financial position and requirements first. Do not buy term insurance just for the sake of it.