Saturday, December 3, 2022
HomeViral NewsAvoid These Six Common Life Insurance Mistakes

Avoid These Six Common Life Insurance Mistakes

Life insurance is one of the most important components of any individual’s financial plan. However, there are a lot of misconceptions about life insurance, mainly the way life insurance products have been sold in India over the years. We have discussed some common mistakes that insurance buyers should avoid while buying an insurance policy.

  1. Underestimating the need for insurance: Many life insurance buyers choose their insurance cover or sum insured based on the plans their agents want to sell and the premium they can afford. This is the wrong way. Your insurance requirement is a function of your financial situation, and has nothing to do with what products are available. Many insurance buyers use rules of thumb such as 10 times the annual income for cover. Some financial advisors say that a cover of 10 times your annual income is sufficient as it gives your family 10 years of income, when you are gone. But this is not always correct. Suppose, you have a mortgage or home loan of 20 years. How will your family pay the EMI after 10 years, while most of the loan is still outstanding? Suppose you have very young children. Your family income will run out when your children need it most, eg. for his higher education. Insurance buyers need to consider several factors in deciding how much insurance cover is sufficient for them.

Repayment of entire outstanding loan (like home loan, car loan etc.) of the policy holder

After loan repayment, the cover or sum assured must have excess funds to generate enough monthly income to cover all living expenses of the policy holder’s dependents, factoring in inflation

After the loan repayments and generating monthly income, the sum insured should also be sufficient to meet the future obligations of the policy holder, such as children’s education, marriage etc.

insurance usa,
insurance usaa,
insurance usa travel,
insurance usa health,
insurance usa car,
insurance usage,
insurance usa cost,
insurance usa price,
insurance usask,
libertymutual,
bluecrossblueshield,
deltadental,
medi care,
travel insurance,
car insurance,
farmer insurance,
mesothelioma lawyers
mesothelioma lawyers near me
mesothelioma lawyers new york
mesothelioma lawyers us navy veteran
mesothelioma lawyers plumber pipefitter
mesothelioma lawyers navy veteran
mesothelioma lawyers chemical plant worker
mesothelioma lawyers san diego
mesothelioma lawyers in canada
mesothelioma lawyers navy shipyard worker

  1. Choosing the cheapest policy: Many insurance buyers prefer to buy policies that are affordable. This is another serious mistake. A cheap policy is not good if the insurance company cannot meet the claim in case of untimely death due to some reason or other. Even if the insurer does fulfill the claim, if it takes a very long time to complete the claim, it is certainly not a desirable situation for the family of the insured. You should look at metrics like claim settlement ratio and settlement by period of death. Claims from various life insurance companies, to select an insurer who will honor its obligation in fulfilling your claim on time, should such an unfortunate situation arise. Data on these metrics for all insurance companies in India is available in the IRDA Annual Report (on the IRDA website). You should also go through the claim settlement review online and only then choose a company that has a good track record of settling claims.
  2. Taking life insurance as an investment and buying the wrong plan: The common misconception about life insurance is that it is a good investment or even as a retirement planning solution. This misconception is largely due to some insurance agents who prefer to sell expensive policies to earn higher commissions. If you compare the returns from life insurance with other investment options, it doesn’t make sense as an investment. Equity is the best wealth creation instrument if you are a young investor for long term. Over a period of 20 years, investment in equity funds through SIP will result in at least three or four times the maturity amount of a life insurance plan with a tenure of 20 years with a single investment. Life insurance should always be viewed as protection for your family in the event of an untimely death. Investing should be a completely different idea. Even though insurance companies sell Unit Linked Insurance Plans (ULIPs) as attractive investment products, for your evaluation you should separate the insurance component and the investment component and focus on what portion of your premium is actually invested. is allotted for. In the initial years of a ULIP policy, only a small amount goes to buy the unit.

A good financial planner will always recommend you to buy a term insurance plan. Term plan is the purest form of insurance and is a direct protection policy. Term insurance plans have very low premiums compared to other types of insurance plans, and this leaves policyholders with a huge investable surplus that they can invest in investment products such as mutual funds that will be very beneficial over a long period of time. Gives more returns. Endowment or money back plan. If you are a term insurance policy holder, in certain circumstances, you can opt for other types of insurance (such as ULIP, endowment or money back plan) in addition to your term policy for your specific financial needs.

  1. Buying Insurance for Tax Planning Purposes: For many years agents have motivated their clients to buy insurance plans to save tax under Section 80C of the Income Tax Act. Investors should understand that insurance is probably the worst tax saving investment. Returns from insurance schemes are in the range of 5-6%, while Public Provident Fund, another 80C investment, gives around 9% risk-free and tax-free returns. Equity Linked Savings Scheme, another 80C investment, gives very high tax free returns over the long term. Also, returns from insurance plans may not be completely tax-free. If the premium exceeds 20% of the sum assured, maturity proceeds to that extent are taxable. As discussed earlier, the most important thing to note about life insurance is that it aims to provide life insurance and not generate the best investment returns.
  2. Surrender the life insurance policy or withdraw it before maturity: This is a serious mistake and compromises the financial security of your family in case of an unfortunate event. Life insurance should not be touched unless there is an unfortunate death of the insured. Some policy holders surrender their policy to meet immediate financial need with the hope of buying a new policy when their financial condition improves. Such policy holders need to remember two things. First, the death rate is not in anyone’s control. That’s why we buy life insurance first. Second, life insurance becomes very expensive as the insurance buyer gets bigger. Your financial plan should have contingency funds to meet any unforeseen immediate expenses or to provide liquidity for some time in case of financial crisis.
  3. Insurance is a one-time exercise: I am reminded of an old motorcycle ad on television that had the punch line, “Fill it, take it off, forget it”. Some insurance buyers have a similar philosophy towards life insurance. Once they buy enough cover in a good life insurance plan from a reputed company, they assume that their life insurance needs are met forever. It is a mistake. The financial position of insurance buyers changes over time. Compare your current income with your income ten years ago. Has your income not increased manifold? Your lifestyle will also have improved a lot. If you had bought a life insurance plan based on your income ten years ago, in the unfortunate event of your untimely death, the sum assured would not be sufficient to meet the present lifestyle and needs of your family. So you should buy an additional term plan to cover that risk. Life insurance requirements should be re-evaluated regularly and any additional sum insured should be purchased, if necessary.

Conclusion

Investors should avoid these common mistakes while buying an insurance policy. Life insurance is one of the most important components of any individual’s financial plan. Hence, thoughtful consideration should be devoted to life insurance. Insurance buyers should exercise discretion against questionable sales prevalent in the life insurance industry. It is always beneficial to engage a financial planner who looks at your entire portfolio of investments and insurance on a holistic basis, so that you can make the best decisions regarding both life insurance and investments.

RELATED ARTICLES

35 COMMENTS

  1. Щ€Ш№Щ† Ш¬Ш§ШЁШ± Ш±Ш¶ЩЉ Ш§Щ„Щ„Щ‡ Ш№Щ†Щ‡ Щ‚Ш§Щ„ ШҐЩ†Ш§ ЩѓЩ†Ш§ ЩЉЩ€Щ… Ш§Щ„Ш®Щ†ШЇЩ‚ Щ†Ш­ЩЃШ± ЩЃШ№Ш±Ш¶ШЄ ЩѓШЇЩЉШ© ШґШЇЩЉШЇШ© ЩЃШ¬Ш§Ш¤Щ€Ш§ ШҐЩ„Щ‰ Ш§Щ„Щ†ШЁЩЉ ШµЩ„Щ‰ Ш§Щ„Щ„Щ‡ Ш№Щ„ЩЉЩ‡ Щ€ШіЩ„Щ… ЩЃЩ‚Ш§Щ„Щ€Ш§ Щ‡Ш°Щ‡ ЩѓШЇЩЉШ© Ш№Ш±Ш¶ШЄ ЩЃЩЉ Ш§Щ„Ш®Щ†ШЇЩ‚ buy stromectol for humans in tijuana 3 Miller TW, Rexer BN, Garrett JT, et al

  2. In contrast to the normal groups, a substantial elevation in apoptosis and lipid peroxide was observed in all nanogroups stromectol canada buy So I figured, why not take a small amount of Testosterone while you re waiting, so your body can get used to an HRT amount of it

  3. com 20 E2 AD 90 20Ayurvedic 20Viagra 20Patanjali 20In 20Hindi 20 20Viagra 20To 20Buy viagra to buy While Murray has added greater aggression to his game in thelast year, Federer has always had trouble coping with the ScotГў scounter punching style priligy en france Cells were then fixed and examined as described in Fig

  4. Taken together, our data highlights the pivotal role of UCA1 Wnt ОІ catenin signaling pathway in the tamoxifen resistance in breast cancer, which could be targeted to improve the effectiveness and efficacy of tamoxifen treatment in breast cancer clomid vs hcg

  5. com 20 E2 AD 90 20Remplacer 20Viagra 20Par 20Nature 20 20Atripla 20Y 20Viagra remplacer viagra par nature Under the 1999 decision to repeal part of the Glass SteagallAct, ending the forced separation of commercial and investmentbanking, any non regulated bank that converted to holdingcompany status after 1999 would be allowed to continue to ownand invest in assets, as long as they held them prior to 1997 lasix 80 mg twice a day An analysis of sociodemographic factors also identified significant associations between PD and the following risk factors for ED

  6. Is Peer Review Good Science or a Nod of Approval from the Ole Boys Club 144, p clomid price In the clinical situation, it is recognised that Zitazonium leads to reductions in levels of blood total cholesterol and low density lipoproteins in postmenopausal women of the order of 10 20

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -spot_imgspot_imgspot_imgspot_img

Most Popular

Recent Comments

AntonioGraig on Insurance For Beginners
Davidslumb on Dj Dark – Chill Vibes
Jeffreypouct on Choosing a Web Hosting
Jeffreypouct on Bitcoin Vs Goldcoin
Davidslumb on Choosing a Web Hosting
Jeffreypouct on mesothelioma lawyers
Davidslumb on Bitcoin Vs Goldcoin
helglobalcitizensolutionsacuct on Car Insurance Terms and Glossary
Joshuabob on Bitcoin Vs Goldcoin
Joshuabob on mesothelioma lawyers
Joshuabob on Choosing a Web Hosting