Many people buy life insurance policies without understanding the features, coverage, and benefits. Due to this, they not only choose the wrong plan but also lose the benefit from the same. This is due to the lack of awareness of the policy cover and the exclusions.
Before you purchase a life insurance policy, you need to ensure that you do not do it for the below-mentioned reasons.
1. To reduce tax payable
The biggest reason people buy a life insurance plan is to cut down on the tax liability. This should never be the sole objective of buying the plan and if it is your objective, you need to consider other investment products that not only cut down on the amount of tax but also give high returns.
2. The agent has created a long-lasting impression
Agents convince clients by showing low premiums at high coverage and by asking for minimal documentation. They might also offer you tips on different ways you can save tax. Do not simply follow everything that the agent tells you. Take some time and understand the plan. Do not be in a rush to sign on the dotted line.
3. Suggestions from family and friends
Your friends and family are your well-wishers. However, you need to understand that the effectiveness of every insurance plan will vary from one individual to another. A product that works well for your friend might not work in the same manner for you. Your income, health, and needs are different from theirs and one plan will not be suitable for all.
4. The insurance agent is your relative
Agents have a habit of approaching friends, relatives, and family to sell their policy. In this case, you need to be able to say no to them. You are under no obligation to purchase the policy because the agent is your friend or relative. An insurance plan is a long-term commitment and you need to think before you act.
5. Never mix insurance and investment
The agent might try to convince you by saying that a life insurance plan offers investment and insurance benefits. There are life insurance moneyback policies that offer the same. However, before you make a decision, you need to understand what a moneyback policy is and consider whether you need it or not. You need to consider whether you are looking for a pure insurance product or looking for a return from the policy.
6. No need for a medical checkup
This is the worst reason to buy an insurance plan. Buying life insurance is an important decision and a life-long investment. You should not decide whether to buy one or not based on a negligent factor like no medical exam in life insurance. In reality, a medical examination will assess your health condition and you will be able to choose a suitable insurance plan.
7. Guaranteed returns
Guaranteed returns in a life insurance policy come at a cost. If you are looking for returns and not comprehensive coverage, you can opt for other investment options.
If you are buying life insurance for any one of the above-mentioned reasons, you need to look for alternative options. The ideal purpose of life insurance is to be a cover for your life and you should buy it for the same reason.