Buying term insurance is one of the smartest financial decisions you can make for your family’s security. But many people still make common mistakes that reduce coverage, increase premiums, or create problems during claims.
To help you avoid these issues, here are the most common mistakes people make when buying term insurance — and how you can avoid them.
1. Choosing Insufficient Coverage
Most people pick a low sum assured to save money, but this is a big mistake.
Ideal rule: Your coverage should be 10–15 times your annual income.
Why this matters:
- Household expenses
- Children’s education
- Loan repayments
- Medical emergencies
Low coverage = financial gaps for your family.
2. Delaying Term Insurance Purchase
Many people think they’re “too young” to buy term insurance. This delay increases premium rates later.
Why you should buy early:
- Lower premiums
- Higher coverage availability
- Faster approval due to fewer health issues
Early purchase = long-term savings.
3. Hiding Health or Lifestyle Information
People often hide details like smoking, alcohol use, diabetes, BP, or past illnesses.
Result: Claim rejection due to non-disclosure.
Always provide accurate information. Insurers verify all details during investigation.
4. Ignoring Riders (Add-ons)
Riders provide extra protection at a small additional premium.
Common riders people ignore:
- Critical Illness Rider
- Accidental Disability Rider
- Waiver of Premium Rider
These riders add huge value during real emergencies.
5. Comparing Only Premium, Not Benefits
Cheapest plan ≠ best plan.
What to compare:
- Claim Settlement Ratio
- Solvency Ratio
- Rider options
- Customer service
- Coverage benefits
Choose value, not just low price.
6. Taking Very Short Policy Tenure
People choose coverage only till 50–55, which is a common mistake.
Correct option: Take coverage till 60–65 years.
Why:
- Responsibilities continue
- Health risks increase with age
- New policies become very expensive later
7. Not Checking Claim Settlement Ratio (CSR)
CSR tells how many claims a company approves.
A good CSR: Above 95%.
Low CSR companies may delay or reject claims.
8. Selecting Wrong Nominee or Not Updating Nominee
This mistake creates problems during claim payout.
Update nominee after:
- Marriage
- Divorce
- Childbirth
Choose a nominee who can manage finances wisely.
9. Ignoring Inflation
A ₹50 lakh plan today may not be enough 15–20 years later.
Better options:
- ₹1 crore or higher sum assured
- Increasing term plan (coverage rises yearly)
10. Not Reading the Policy Details
People skip reading important sections like:
- Exclusions
- Waiting periods
- Rider conditions
This leads to confusion during claims.
Always read or ask your advisor to explain the policy clearly.
Conclusion
Term insurance is simple, but mistakes in choosing coverage, hiding information, or ignoring essential riders can create big problems later. By understanding these common mistakes, you can make a smarter, safer, and more confident decision for your family’s future.
