When we buy a product or hire a service, we are looking at fulfilling a need, want or a desire. To put it in other words, through the benefits of a product or a service, we want a certain job to be done. For instance - when we buy a car, the job we want done is, for us and our families to commute safely from one place to another. When we stay in a hotel, the job we want done is, for us to have a restful and comfortable stay. Similarly, when you buy a Life Insurance policy you want to secure financial future for your family or your own post-retirement life. The job we want the Life Insurance Policy to do is to secure our financial goals and provide financial security for the family.
Purchasing Life Insurance policy can be time-consuming decision often spanning weeks and even months for some people. The need to make the right decision for you and your family’s future warrants careful examination of the benefits you want from your life insurance plan. So, when you are thinking of buying a Life Insurance Policy you must consider what job you want done and once you are clear about that, hold on to your policy till it delivers the same for you. Not thinking through at the beginning, making hasty decisions and giving up on your policy early, can cost you dearly.
Here are the 5 mistakes that smart consumers should avoid with their Life Insurance policy:
Check your needs
When someone is selling you a life insurance plan, you ought to make sure that you are clear about reasons for buying it. If you need help with establishing that, ask your advisor or salesperson to perform a needs analysis exercise. If your advisor or salesperson is unable to conduct a satisfactory needs assessment, then your decision may end up benefiting only the salesperson and not you.
Know the details before signing
Life Insurance contract form is the most important paper you sign however, most people delegate the task of form filling to the distributor or salesperson. Be informed that if you are one of them, you may be committing a big mistake! Life Insurance contracts are based on good faith which means that the Insurance Company considers facts shared in the contract form bonafide and true in all respects. Your health, occupation, family history and lifestyle information are critical for the insurance company, and failure to provide accurate information may lead to your claim being rejected. Therefore, one must go through the contract process diligently.
Not verifying your policy details
Once you receive your Life Insurance policy, spend some time going through the documents. While the policy bond may seem like a long and wieldy document most Insurance companies share the important details pertaining to the product in a simple and convenient format. You also get a copy of contract form along with benefit illustration etc. Once you have gone through the details and find the product benefit information to be different than what was provided to you, feel encouraged to return the policy to Insurance Company for correction or seeking a refund. Note that you get a 15 day period to return the policy after it reaches you.
Keep your family informed
Remember that the policy is bought for the benefit of your family therefore not discussing the details of the policy, claim process etc. with your spouse or parents especially the nominee(s) can put them to a great discomfort in time of need. Policy bonds should also be kept safely and in the know of your family. The good news here is that you now have the option to ask for digitized policy document using the E-Insurance Account facility (it works just like Dematerialised shares) provided by your insurer.
Not keeping your commitment to the contract
One of the most common mistakes people make is that they don’t continue paying premium till the contracted term. Discontinuing or surrendering or lapsing your policy mid-way can be a very significant mistake if you have not thought it through adequately. Remember if you bought the plan after proper needs assessment, you must go back to it and validate the relevance of your goals. If the goals are still relevant, your policy is relevant. Some people relinquish the contract to pay for short-term liability that they encountered. Here, one must check if the Insurer provides loan facility on the policy. If that works, then take the loan and continue your policy. There may be other reasons as well however, one must discuss the issues openly with your Insurer and understand the impact of such a decision adequately before going ahead. Do note that if your insurance needs to grow and change with time, so rather than discontinuing your policy you must constantly assess your financial goals and ensure that the job you wanted to be done gets done.
These mistakes are best avoided and the best way to avoid mistakes is by being aware and knowing your rights!