Top Mistakes People Make While Choosing Term Insurance – And How to Avoid Them

When you want to keep your family financially secure, term insurance is one of the smartest choices you can make. It’s simple, affordable, and covers your life when needed. This is why most salaried members and self-employed professionals are drawn to it.

But here lies the catch: in a rush to get the policy, people sometimes make mistakes. In this article, let’s explore some of the most common mistakes that individuals make in selecting a term insurance plan and the strategy to avoid them.

Not Buying Enough Cover: Don’t Underestimate Your Needs

One of the most frequent mistakes is opting for a cover amount that’s too low to truly support your family.

Here’s how to get it right:

• Avoid Emotional Estimations: Don’t just guess a number that “sounds right”. Use online term insurance calculators to assess your actual requirement based on income, liabilities, and future goals.
  
• Consider Future Inflation: A ₹1 crore cover might seem like a lot today, but its real value will decrease over time. Always factor inflation into your calculations.
  
• Account for Your Dependents: If you’re the sole earner or supporting elderly parents and young children, your coverage should reflect that additional responsibility.

Ignoring Riders: Small Add-Ons That Make a Big Difference

Riders are optional benefits that can be added to your term insurance plan at a marginal cost, offering more comprehensive protection.

Top riders you shouldn’t ignore:

• Critical Illness Rider: A serious illness diagnosis triggers a lump sum payment that assists with costly medical care.
• Accidental Death Benefit: An extra death benefit will be paid when an accident causes death which benefits people who work in dangerous fields or travel regularly.
• Waiver of Premium: The policy stays active when you become disabled or sick enough to stop paying premiums

By ignoring riders, you miss out on customising your plan to your specific risks and needs.

Misunderstanding ROP Plans: Know What You’re Paying For

The term insurance return of premium (ROP) variant is increasingly popular, especially among those who want insurance with some maturity benefit. However, misunderstanding how it works can lead to regret.

Here’s what to keep in mind:

• Higher Premiums for Return: The ROP version costs more than regular term insurance because it refunds premiums if you outlive the policy term—but this refund excludes GST and rider premiums.
  
• It’s Not a High-Return Investment: Think of ROP as a disciplined savings feature, not a wealth-creation product.
  
• When ROP Makes Sense: If you’re the type who prefers not to ‘lose money’ on premiums and won’t invest elsewhere, term insurance return of premium can offer peace of mind.

Buying Late or Without Comparison: Time and Research Matter

Delaying the purchase or going with the first insurer you find can lead to higher premiums or missing better features.

Tips to buy smart:

• Buy Young: The earlier you buy, the lower your premiums—simple as that.
  
• Compare Plans: Use online aggregators to compare benefits, claim settlement ratios, and premium costs.
  
• Disclose Honestly: Hiding health issues may reduce premiums initially, but can void claims later.

Do Not Be Rushed, But Make an Informed Decision

Choosing the right term insurance needs careful thought. It affects your future and your family’s security. You can pick a basic plan or one with a return of premium. Check your coverage needs, explore add-ons, and watch out for common mistakes. Take your time, do your research, and choose a policy that will truly protect your family from an empty life afterwards.