These Common insurance mistakes you must avoid for financial security : Insurance is an important part of financial planning. It acts as a safety net that protects you from facing sudden problems and wiping out your savings. Insurance is a contract where the insurance company compensates for the loss covered by you, so that your money is safe in case of sudden trouble.
Different insurances like life insurance, health or car insurance meet different needs. But due to complex jargon and rules while choosing insurance, people often make mistakes, which can prove to be costly later.
Insurance is very important for your financial security, but if you make some common mistakes, it can put your financial future at risk. So let’s take a look at the common mistakes that we should avoid while buying an insurance plan.
7 common mistakes related to insurance that everyone should avoid
Not understanding your needs
The most common and biggest mistake is not understanding your real needs and buying insurance without thinking. Santosh Agarwal, Chief Business Officer of Policybazaar.com, says that a young man from Delhi thought that a health insurance of Rs 5 lakhs is enough for his family.
But the cost of treatment in metro cities is so high that this amount may fall short in case of a serious illness. In such a situation, there should be a cover of at least Rs 25 lakhs for every person so that in case of an emergency, money does not have to be taken out of the pocket. In such a situation, people are advised to keep in mind their needs, family members and place before buying insurance.
Not comparing policies
Often people buy insurance only on the advice of the agent, while the agents insist on selling commission-based policies. For example, a family can get stuck in an expensive policy that has fewer benefits, while better and cheaper options are available in the market.
In such a situation, it is wise to compare the coverage, cost and terms of the policies of different companies on online portals. This easy method will take care of both your pocket and your needs. Remember not to hurry while choosing insurance. With the right information and comparison, you can choose a policy that will really prove to be helpful in your difficult times.
Hiding important information
It is very important to be completely honest while taking insurance. Santosh Agarwal explains that deliberately hiding information can put you in trouble. For example, if a smoker takes life insurance by hiding his habit and the company comes to know about it at the time of claim, then the policy can be cancelled. Hiding things like smoking, chronic diseases, or previous claims creates problems in getting claims. Due to this, your family does not get protection in times of crisis.
Ignoring the terms of the policy
Often people do not read the fine print (detailed terms) of the insurance. For example, if you have taken third party car insurance and the car gets stolen, then you will not get any compensation because this policy does not cover theft. In such a situation, you have to bear the entire loss. Therefore, before choosing a plan, carefully understand its exclusions (what is not covered), deductibles (deductible amount), and benefits.
Giving importance to cheap premium
In the pursuit of taking a cheap policy, people give up important covers. For example, a young couple took health insurance with a low premium, but they did not pay attention to co-pay and non-covered treatments. Later, when they got a serious illness, they had to pay a huge hospital bill themselves.
Therefore, while choosing a policy, focus on the quality of coverage rather than low premium. Before taking insurance, definitely ask the agent for the policy document. If you do not understand, ask a financial advisor and make a list of the aspects that are not covered – this will save you from shocks in the future.
Not checking the policy regularly
With changes in life, insurance needs also change. Suppose you got a new room built in the house or upgraded the kitchen. This increased the value of the house, but if you did not give this information to the insurance company, then there may be a problem while making a claim in the future. It is necessary to get your policy updated every year or when there is a major change. Otherwise, there is a risk of the claim being rejected.
Not understanding the claim process
Just buying insurance is not enough. Agarwal says that let us assume that in a health emergency, a family gets stuck in a complicated process of claim. Therefore, choose a company whose claim settlement ratio is good and the process is easy. So that it saves your hard-earned money in difficult times.
Do not make these 7 mistakes while buying an insurance plan. Understand your needs, compare the policies of different companies, and understand all its terms and conditions well. The right plan can become a strong shield against the uncertainties of your life.
