Even though you are financially sound, there is no denying the possibility that your decisions may turn out to be wrong at times.
Incorrect steps in budgeting, over-purchasing and inadequate preparedness for emergencies and many other things can be examples of this. In this way it can be said that no person is untouched by mistakes in financial decisions.
Making a mistake is not a bad thing. Identifying and learning about your needs and interests is often the best way to learn financial management that best suits you. However, life insurance is one such tool, in which making a mistake can be very costly for you.
If you do any kind of mistake in this, then the people dependent on you have to bear the brunt of it. As a risk management tool, life insurance protects the interests of the family members in the absence of the policyholder. Come,
not buying term insurance
People generally lay emphasis on increasing their wealth and with this goal buy insurance as an investment instrument. They refrain from buying term insurance on the grounds that the pre-existing investment based insurance includes life cover or they have built up a substantial amount through other instruments.
However, most people do not understand the importance of the fact that the basic goal of a term plan is to ensure economic stability without affecting the financial stability. Your investments are often linked to investments like children’s education, retirement.
Hardly any person creates funds for the financial continuity of his family. In such a situation, if someone is dependent on you, then term plan is not optional but inevitable.
There is not only one medicine for every merge
Life insurance is a long-term solution wherein there is rarely any direct benefit to the policyholder as it is bought for the people who are dependent on you. People ‘desire’ more while buying life insurance in the quest of immediate benefits.
Along with this, another mistake that people make time and again is that of trying to accomplish many goals with one solution. This reduces the provisioning for each of your goals.
Hence, it is important to remember that life insurance covers the financial needs associated with the crucial stage of life. In such a situation, buying one for every goal can derail your quality of life in future.
not disclosing all information
The biggest mistake many smart people make is by not providing complete information. They feel that they know what to disclose and what not to disclose while buying a life insurance policy.
In this entire buying process, underwriting related to the individual’s risk profile (financial and medical) is of paramount importance. To avoid that the premium does not increase, people do not give complete information.
Due to such mistakes, insurance companies reject the claim. This defeats the whole purpose of buying the policy.
family not aware
The biggest mistake is not to inform your dependents about your financial decisions. The real purpose of buying life insurance will not be served if the people dependent on you do not know the details of your policy.
Life cover review is essential
Life insurance is a long-term instrument. People generally feel that once you buy, your purpose is served. However, as you go through different phases of life, the financial constraints of your life also change. That is why it is important to review your life cover. It is necessary to do this at least once a year.
Compare Instruments
One of the biggest mistakes smart people make is comparing insurance and other financial products. For example, fixed deposits are often compared to guaranteed insurance plans. However, the purpose of FDs and guaranteed plans is different.
One of them is a savings product while the other is a wealth creation solution. Similarly, ULIP is often compared with SIP. These two cannot be compared as they both have different purpose and both have their own advantages and disadvantages.
Every financial decision has a goal and in case of life insurance the objective is clear – to protect the dreams and aspirations of your family. To avoid any kind of mistake, one should ask oneself that how can I continue the financial continuity of my family without any trouble. When you are in a position to answer this question, everything will be done in the right way.
