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Life insurance is a financial product that ensures your family’s financial security in the event of your unfortunate demise during the policy term while allowing you to grow your wealth over time. These plans have been considered important in everyone’s financial portfolio and can be purchased online or offline at your convenience.
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However, many individuals buy life insurance just to tick it off their list and are ultimately underinsured. This can pose a threat to your family’s financial security in your absence. Let us take a look at the dangers of being underinsured and how you can avoid them.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
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Being underinsured means that the life insurance purchased by you is not sufficient in order to financially protect the future of your family. This will leave your family vulnerable to financial struggles in your absence and lead a stressful life. If you’re underinsured, the payout from your life insurance policy may not be enough to cover your family’s immediate and long-term expenses. This includes daily living costs, education for your children, and outstanding loans. The financial instability that follows could force your family into debt, leading to a drastic decline in their standard of living. Without adequate coverage, your loved ones might struggle to make ends meet, putting their future at risk.
There are several reasons why many people are underinsured, some of them are as follows:
Lack of Awareness: Many people are simply unaware of how much coverage they actually need. They might choose a policy based on affordability rather than adequacy.
Cost Concerns: The perception that life insurance is expensive can lead to opting for lower coverage. However, the real cost of being underinsured is often far greater than the premiums saved.
Complexity and Confusion: The different types of life insurance products available can be confusing, leading people to make uninformed decisions about the level of coverage they need.
Over-Reliance on Employer-Provided Insurance: Some people rely solely on the group life insurance provided by their employer, which is typically insufficient and may not follow them if they change jobs.
Buying Policy for Tax Benefits: Some individuals buy life insurance just to claim life insurance tax benefits and do not consider choosing the right life cover for their family.
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Here is how you can ensure that you are not underinsured at the time of buying a policy:
Assess Your Financial Obligations: Calculate your family’s financial needs, including daily living expenses, outstanding debts, and future goals like children’s education and retirement.
Factor in Inflation: Make sure your coverage accounts for inflation to ensure that the payout retains its value over time.
Review Your Policy Regularly: Life changes, such as marriage, the birth of a child, or a significant increase in income, should prompt a review of your insurance coverage.
Consult a Financial Advisor: A financial advisor can help you determine the right amount of coverage based on your unique financial situation.
Consider Adding Riders: Life insurance riders, such as critical illness or accidental death benefits, can enhance your policy and provide additional protection.
Term insurance is the best if you are under-insured because it is the best way to increase your coverage amount by increasing the sum assured. Moreover, term plans are cheaper. So, if you already have any other life insurance (non-term) plan, which does not cover you sufficiently, buying a term insurance cover, will not be much painful for your pocket.
Note: Know what is term life policy first and then buy a term plan for your loved ones.
Note: It is suggested to calculate the term plan premium on the term plan calculator online tool by Policybazaar before buying.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Being underinsured marks the purpose of taking an insurance policy. So, if you have already taken an insurance plan out of sheer ignorance, you need to figure out ways to increase your life cover. Now that you have already purchased a non-term insurance plan, one of the best ways to bridge this gap is to purchase a term insurance plan. There are several term plans available in the market, which can help an individual to increase their insurance cover at a very nominal premium.
If you are underinsured and you are still not sure what you need to do to increase your insurance cover, feel free to contact us. We will be glad to help!
Note: Check out the best term insurance policy in India and choose one that suits your requirements.
Note: You should also check the benefits of term insurance if you are planning to purchase the term insurance plan.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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