We generally avoid buying financial products because of their complexity .For a layman it is hard to decipher the real cost benefit analysis by understanding the feature offered under a plan. In an attempt to buy one because we need we end up making some wrong and hasty decision and which lead to long term bad effect on your financial plan. A similar scenario happens in case of life insurance too. We end up buying life insurance plans for minor objectives like tax savings and others and mess up our financial plan/
So you can avoid doing mistakes which people generally make you look at things at broader angle or otherwise you end up wasting your hard earned money. Few of the common mistakes which people making while buying life insurance are
I am very young so I don’t need a life insurance, this is a common error which most make of the people make. We should understand that life insurance is meant for giving financial not to the person who is buying the policy but to his/her dependent. You might be young and just started your career but while buying a life insurance policy you should always look at the underlying financial responsibility. You might need money to support your parents or might need money to support your siblings to do further education. In case if you are not there then who will take care of your financial responsibility. So it is not the age which is important but the value of your financial liability is important .Another important thing is that the young you buy the lesser amount of money you pay for it.
Treating insurance as investment. Though there are variants of life insurance plans like Endowment and ULIPs which have an investment feature and which might also attract you because of the twin benefits but one should know that nothing comes free. In fact if you check the extra cost involved you might find bit costly compared to regular investment option like mutual fund plus you also need to pay the extra cost insurance too. So please don’t get confused while buying a life insurance plan , be very clear with your objectives why you are buying one.
Exiting policy at the wrong time. We should know that insurance plans are designed in a way so that you can actually draw benefits out of it only when you complete the total period of the contract. The charges of early exit are always very high. A very early exit might even lead to zero money coming back to you as the surrender value would be completely eaten away by the charges. So while buying life insurance you should be clear with your objective of protection and the period which you have give before can actually reap the benefits.
Buying too many policies. This is a very common mistake which people make. Every Life insurance policy you buy there is a cost involved. You agent might push you to buy large number of policy lured by an extra incentive which the insurance company might be giving him but don’t get taken away by that. You should always look one life insurance policy and which should have the flexibility of adjusting it as your needs and stages of life in future.
Cheapest one the best. This is common mistake which people while buying term insurance plans online. You should keep in mind while analyzing a life insurance policy that cheaper should not mean less in feature. While buying online term plans people get taken away by cheaper premium but before buying you should always compare it with the offline version and do a just analysis based upon the feature it has to offer