Buying insurance is NOT a mistake. It is
important to insure, because it purchases peace of mind. Not having insurance
is much like taking a family vacation in your car and not carrying a spare
tyre. The mere possibility of a flat is enough to ruin your peace of mind.
Millions buy insurance, and promptly forget about it: till a claim arises. Many
thousands of claims are rejected because of the common mistakes made when
buying insurance. Here are the six most common ones.
1.
Not enough research: A lot of insurance is hard sell; sold and
purchased hurriedly. This leaves little time to check the suitability or need.
Motivated comparisons, wrong illustrations and untrained distributors add to
the confusion. It makes sense to be sure of your need, and then do a little
research on what are the best options available. Research the distributor’s
competence, competitive products and the companies on offer. Compare Insurance policies before you decide to buy one.
2.
Too much or too little: Buying too
much is rare. Most people end up buying too little. What is the appropriate
amount of insurance one must have? In the case of property (say motor, or home)
it is usually simply the current value of the asset. In case of life, a rule of
thumb is ten times your annual income. Health Insurance is more complicated and
a lot depends on your lifestyle and ability to pay premiums. Health premiums
are eligible for a tax rebate. First check out what the premiums up to the
current tax limit will buy for you, adjust thereafter based on your needs.
3.
Not reading the contract/documentation: This is so common as to almost be the rule. We rarely if ever open
the document and read the conditions: even a cursory glance will reveal that
the contract is written to protect the insurance company. Most insurance
contracts have a cooling period; usually a couple of weeks. During this period
you can return the contract for a full refund. Read your rights and also ensure
that your obligations are met. Many a claim is rejected because some obligation
on your side is not fulfilled to the letter.
4.
Inform your family about the details: Insurance protects you and your assets. It makes sense to inform
your family about the details. There have been instances where claims have been
rejected because of late intimations of loss.
5.
Read the application form and fill it out yourself: Insurance applications forms are complex and carefully worded. It
is wise to tell the truth and if in doubt all the details. The more complete
the answer the less the scope for a claim rejection. It has happened that the
distributor may enter a wrong answer in spite of you wanting to be truthful,
hence fill out the form yourself to avoid nasty surprises when filing for a
claim.
6.
Not buying from a professional:
Insurance agents are a dime a dozen and come in all shapes, sizes, and
longevities. This profession has more than its fair share of dodgy, untrained
fly-by-night operators. Buy from a professional who is sincere to his
profession and cares about your needs.
Made any of these mistakes and suffered the
consequences? Made a new mistake? Let us know and we shall share those as well.
Amit Kumar
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