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Life Insurance Myths Decoded

Everyone wants to ensure a financially secure future for their loved ones and the best way to do so is to have a life insurance policy. However, many people find it very confusing and tricky to buy the right life insurance policy because of the myths associated with it. As there is an extensive range of life insurance policies available in the market, many times the insurance buyers fail to purchase enough coverage for their family and end up purchasing the wrong policy.

To help you make an informed decision about a life insurance plan, here we have decoded common myths related to the life insurance policy.

Myth 1: Life Insurance Plans are Expensive

Fact: On contrary to this myth associated with the life insurance policy, these plans are not at all expensive. Moreover, the simplest form of life insurance plan is a pure term insurance policy, which offers the highest life coverage to the family of the insured at the lowest premium rate. These life insurance products provide financial protection to the insured’s family and help them to deal with the liabilities in case of the demise of the insured person during the policy tenure. As per the requirement and suitability of the insurance holder they can pay the premium of the policy in yearly, half-yearly, quarterly, and monthly mode. The term insurance plan offers the sum assured amount 10 times the annualized premium.

Myth 2:Life Insurance is a Tax Saving Product

Fact: Tax saving is just another aspect of the life insurance policy. we can call it an added perk to the policy as the policyholder can claim for tax exemption under Section 80C and 10(D) of the Income Tax Act. The prime objective of the life insurance plan is to provide insurance coverage in form of financial protection to the family of the insured in case of any eventuality. Moreover, the life insurance plan also provides an opportunity for the individual to create a financial cushion in the long-term so that they can fulfill the future financial needs of the family.

Myth 3: Young and Single Person Don’t Require Life Insurance Policy

Fact: For single and young individuals, purchasing a life insurance policy is probably the last thing that comes to their mind while doing financial planning. However, contrary to this, if you are single then you have a great advantage of time compounding on investment. Most of the life insurance policies offer a very low premium rate to young buyers as compared to the older ones. Moreover, the early you start investing in a life insurance plan you will be able to earn high returns on contrary to the amount invested after 5-10 years. As per one’s requirement and suitability, they can choose to invest in a savings plan, wealth creation plan or a retirement plan to accumulated wealth in the long-term while providing the right insurance coverage to the family as well.  The policy buyers can also compare different plans online and choose the most appropriate plan as per their needs.

Myth 4:Life Insurance is for Old People

Fact: Most of the young salaried individuals often live in the misconception that life insurance policies are for the old or people who are in their late 30s or more. However, the earlier you purchase a life insurance plan the more beneficial it can prove to be for you. As we know that eventuality can happen to anyone anywhere anytime, it is important to have insurance coverage at an early stage of life as soon as you start earning. Moreover, the added advantage of purchasing a life insurance policy at a young age is that you can opt for higher insurance coverage at a minimal premium rate. This is because young policy buyers tend to be less risky for the insurers as they are less prone to critical illnesses as compared to the old aged people.

Myth 5: Group Insurance is Sufficient

Fact: Many companies offer a group life insurance plan to their employees. However, group life insurance is only effective until the individual is with a particular company. Termination or job change can cause the end of life cover, leaving the individual without life insurance. Moreover, the coverage amount of group life insurance may not be adequate to provide financial protection to the entire family. Thus, to avoid the mishap of any uncertain circumstances, it is important to buy an individual life insurance policy. Having an individual life insurance policy will safeguard the family financially even in the absence of the insured.

Myth 6: Life Insurance Policies Only Provide Protection Against Death

Fact: This is the most common myth associated with the life insurance policy. Yes, life insurance policy indeed provides financial protection to the family of the insured as a death benefit in case of the insured’s unfortunate demise. However, there are many other benefits offered by the life insurance plan.  Life insurance plans also offered guaranteed returns in form of maturity benefit. Moreover,  ULIP and endowment plans offered by life insurance helps to fulfill the investment and savings needs of the individual.  The life insurance product also includes a retirement plan to ensure a financially secure future for an individual after retirement.  All in all life insurance is an insurance product where one can get the benefit of savings, investment returns, financial protection & retirement planning under the same umbrella.

In the Nutshell!

Even though these are some of the most common myths associated with life insurance policies. It is important to have a life insurance plan unless you do not have enough assets to provide financial protection to your family after you are gone. 

Written By: PolicyBazaar - Updated: 06 November 2020
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