5 mistakes people make buying Term Insurance

By Jane Rupert

Special to the Financial Independence Hub

An essential component of planning for the future involves planning your finances. After all, when your career finally falls into place, your funds need to be managed appropriately too. How you save, invest, spend and leverage your income can help with deciding how secure (or not secure) your finances for the coming years will be. In times like these, when the avenues and options are aplenty, it shouldn’t be too difficult to choose the right options for yourself. You can also do research on finding recommended independent agents who can help you get the right insurance policy for your need.

However, making mistakes when you try to work things out on your own is only human, and that’s why we’re here to throw light on some mistakes that you can avoid.

When we say mistakes, we’re talking particularly about Term Life Insurance. Term Life Insurance involves selecting the term or duration for which you will be paying your premium and also allowing your policy to mature and grow in monetary value. Needless to say, the longer you let it mature, the larger your policy amount is going to be when you decide to cash it in or pass it on to your family. That being said, it’s a given that we believe in the importance of taking up a life insurance policy. So, let’s also throw some light on mistakes that you should avoid making when you decide to invest in one.

1.) Being hasty

There are tons of policies and financial companies that you can choose from, so why be hasty about it? A common mistake some people make is to go for the first policy that is presented to them, without doing their own research and weighing out the alternatives in the market. Now, this could lead to you overpaying for your policy or taking up too many riders, without deriving any actual, significant benefit from it. Hence, step one is to always check out multiple, get instant term life insurance quotes, make a proper comparison and then decide which policy best suits your requirement.  

2.) Buying small

For some of us, an insurance policy is a way to make up for deficit income. Whether it’s because of disability or unemployment, it’s important to have something as a backup to help you out in times of financial crisis. However, a common mistake people make is to take a policy that is only just enough to make up for their income, without considering the long-term repercussions of it. Taking a small policy amount also means that it won’t last you too long, and if a sudden medical emergency arises, for example, you might burn through that amount in no time. Taking a larger policy amount is a smart move because it ensures that you have a broader net to fall on if times get rough.

3.) Procrastinating

“I’ll think about it next year” is what some people say when asked about whether or not they have insurance. Life insurance especially works out better the earlier it’s taken. It’s a misconception that only middle-aged or older people can take up a policy; life insurance taken earlier has the very obvious benefit of time. It gives you a longer time to pay the premium, your premium amount builds up over time, and you’re also providing for your future family needs. Experts say that even young professionals who are just starting out can easily take up a life insurance policy, and choose to increase their premium once their income increases. When you make the mistake of starting too late, there are a number of benefits that you eventually miss out on, time being the most significant one of them.

4.) Short-term

Some people make the mistake of investing large, but on a policy that gives only short-term coverage. Taking a policy for let’s say 10 years might not be as beneficial as one that’s taken for 30 years. An essential for family planning involves thinking long-term when it comes to finances, and that’s the reason why most consultants might advise you to go for a long-standing policy. Cashing out earlier can be a tempting proposition, but you might have to start all over again if you end up using that money and don’t have a solid backup anymore. However, if the plan to let even your children enjoy the benefits of the policy, you need to be planning for the distant future ideally.

5.) Skipping review

Once you’ve chosen the policy that suits you best and you’ve taken up your coverage plan, your job doesn’t really end there. Reviewing your insurance policy needs to be done at least once a year and skipping it can prove to be an unnecessary mistake. As time progresses, your needs and requirements, as well as your responsibilities, could increase. In such a case, reviewing your policy will help you understand whether or not you need to continue with your current coverage plan or improve your coverage. An annual review also ensures that you’re not missing out on any changes in the financial market that might affect the way your policy pans out. Whether your policy provider insists on it or not, you need to take the initiative and keep in touch with them, and also regularly ask questions.

Conclusion

While the whole process of financial planning might seem long and tedious, its benefits for the future are unparalleled. Putting in some thought, research and effort into planning your investments today could save you from some unforeseen stations tomorrow. Unexpected expenses and circumstances can crop up at any time, especially when you have a family and home to support. It is critical that you learn the importance of adaptability in the financial sector so you can make effective decisions when it comes to money. Appropriate life insurance lays a foundation for a secure future financially, and of course, gives you the peace of mind that you deserve.

So, if and when you decide to invest in insurance, remember to keep these common mistakes in mind (and make sure to avoid them!). Your money is your asset, and it’s your duty to put it into the right avenues. As per the current scenario, there are many options and choices you have in terms of life insurance. If you make a wise and calculated decision today, it could mean a hassle-free financial growth for you and your family in the years to come!

Jane Rupert is a lively, energetic writer who has experimented across various genres and topics. Currently a freelancer based in Florida, she’s taken a keen interest in writing about financial planning, current monetary trends and many other related topics. Jane is also a part-time counsellor and loves spending time with kids and animals in her free time.