Avoid these mistakes when buying insurance

The idea of insurance being a blessing in disguise, is something that many people have not yet warmed up to. Purchasing insurance, in most cases, is considered absolutely unnecessary, and even those who do decide to buy it, do so with the motive of saving tax, and not really for protection. While this may be attributed to lack of awareness, but something which most people do not realize, is, that misfortune can strike anytime, and anywhere. Enabling you to retain some degree of financial security in times of misfortune, is what an insurance policy helps you achieve. 

If you are looking to become financially secure, then having a balanced portfolio can help you greatly in your efforts. And one of the most challenging part of building a balanced portfolio is choosing the right insurance policy, be it life, health, motor, term, etc. If you are new to the world of insurance but are looking to purchase some essential insurance covers, there are some things you must avoid doing at all costs.

Life Insurance

• Purchasing life insurance for tax saving purposes – The purpose of life insurance is, first and foremost, to provide financial protection to your loved ones in case of your sudden death. Buying  life insurance plan just to save on tax is never a good decision as not only do you end up purchasing an inadequate plan, but also waste your money on premiums.  Life insurance must never be purchased on impulse.

• Outsourcing your insurance application to an agent – It is a common practice for many people to outsource the job of choosing an insurance policy to an agent. What they don’t realize is that the agent has little interest in anything else, but getting their commission. It would be foolish to expect them to match your needs to the right kind of policy, but the one which they are getting the highest commission on, be it term life insurance, a ULIP, an endowment plan, an annuity plan, or anything else for that matter.

• Delaying buying insurance while you’re still young – The only people who don’t need insurance are those who do not have anyone depending on them, either currently, or even in the future. And those who do have or are likely to have dependents, must get insurance cover. Insurance is best purchased while you are young, as it can be obtained at very affordable premiums, due to the low risk involved in insuring someone who is relatively healthy.

• Purchasing life insurance for a short term – Life insurance is something which must always be purchased for a long-term. This is primarily because the cost of life insurance goes up significantly when you are old. Once your 10-year policy term is over, you will have to purchase a fresh policy, which can cost you a lot more than your previous one, owing to your older age. 

Health Insurance

• Buying without comparing – More often than not, in case of health insurance, people end up purchasing a plan which suits their needs, and don’t bother looking further. What they forget is that different providers will structure their health plans differently, which means that policies will differ in terms of their premiums, benefits, coverage, add-on benefits, and many other aspects. While there may not be a single plan that can be labelled as the ‘best health insurance policy’, there are many which can closely fit your requirements.

• Getting the cheapest possible plan - For most people buying health insurance, the premiums of the policy are a major deciding factor. However, this is not the right approach for purchasing health insurance, as it puts you at risk of being under-insured.

• Not paying attention to the policy’s fine print – Insurance contract documents can easily run into multiple pages full of all kinds of details. That is why most people tend to skim over the policy’s coverage details, without paying much attention to exclusions. And that’s where the problem begins.

• Withholding details of your medical history – Insurance contracts are based on the principle of utmost good faith, which implies that the insurer, and the insured must exercise honesty and transparency at all times. When purchasing the policy, some people tend to withhold details regarding their medical history from the insurer, thinking it might lower their premium. This is wrong. Not declaring details related to your medical history can land you in trouble, especially when it is time to raise a claim.

Motor Insurance

• Choosing the wrong insurer – When it comes to choosing the best car insurance policy for your vehicle, it is essential that you choose the insurer with care. One must consider various factors such as the insurer’s cashless garage network, their claim settlement ratio, quality of customer service, and their digital presence, before choosing a particular insure.

• Not choosing a high deductible – In motor insurance terms, deductible is the amount which a policyholder is required to pay before they can receive the claim settlement amount. A low deductible attracts higher policy premiums, while a higher deductible results in lower policy premiums. It is recommended to choose a higher deductible, as it can help you save significantly on your policy premiums

• Not comparing insurance quotes – Like medical insurance, it is important that you compare car insurance quotes that you have obtained from different insurers. Only after you have compared different policies will you be able to find out which one is offering you the best overall deal in terms of price and coverage.

• Forgetting to transfer insurance when buying a second hand vehicle – In order to save money, many people prefer to purchase a pre-used vehicle. However, often they forget to transfer the vehicle’s insurance policy to their name. This mistake is often seen in the case of two-wheelers where buyers forget to transfer the bike insurance policy from the seller’s name to their own post-purchase. This can cause the policy to be invalid as the vehicle is no longer in the seller’s name, and result in the vehicle being uninsured altogether.

• Purchasing motor insurance offline – The internet has made many things possible, including allowing insurance providers to offer lower prices on motor insurance policies purchased online. When you buy a car insurance policy online, you are bypassing the costs that the company will otherwise have to pay to agents and middlemen to sell the policy. Going the online way can not only help you save on premiums, but also help you manage your policy online as well.

For first time buyers, the world of insurance can definitely be quite intimidating. However, with proper research, and knowledge, the task of buying insurance can be greatly simplified, check this website for more information. Remember, life is unpredictable, and insurance is just one step that can help you stay prepared.

This article has been produced by TNM Marquee in association with BankBazaar.