There are several misconceptions in people’s minds when it comes to buying life insurance. Due to these myths, people avoid or procrastinate on their life insurance purchases. However, later in life, due to an unfortunate situation, they regret not having life insurance.
When you are doing your finances, there are some negotiable and non-negotiable products that you need to plan effectively. Securing the life of your loved ones should be one of the non-negotiable things that you need to consider while managing your finances. This is where life insurance comes in. With any financial product, there is a lot of misinformation on the internet. Read further to know about the myths surrounding life insurance and the reality behind it.
Six Myths of Life Insurance
Myth 1: Life insurance is only used after the policyholder's demise
The primary purpose of any life insurance policy is to offer financial security to your loved ones in your absence. However, depending on the plan you select, there are several more uses apart from the primary one. Some riders are available with base life insurance plans which offer additional coverage for an additional premium, for example, riders like critical illness riders, accidental death riders, or family income benefit riders. Also, there are several other life insurance plans which come with a savings or investment component attached to them.
Myth 2: The life insurance coverage your employer provides is sufficient
When your employer provides you with life insurance, you get coverage only till you work in the organisation. When you switch your job or choose to retire, you lose the benefits that life insurance has to offer. Also, life insurance coverage is usually nominal and may not suffice when it comes to meeting your family's needs. You need to take your liabilities, the needs of your family, and inflation into consideration for determining your coverage needs. Use a life insurance premium calculator to get an estimate of the premium you need to pay for your coverage needs.
Myth 3: Young and healthy people do not need life insurance
When you are young and do not have many responsibilities, it is easy to ignore the need of having life insurance. However, it is important to remember that life is full of uncertain scenarios. Over the years, when you start a family, buying an insurance plan becomes much more difficult, since you would already have several expenses that need your immediate attention and the more you will age, the more expensive it will get to buy a life insurance plan. The higher your age, the more your premium is likely to be. Since life insurance protects you and your loved ones against uncertainties, buy one as early as possible.
Myth 4: Older people cannot buy life insurance
If you procrastinated buying a life insurance plan at a young age, remember that it is never too late. Several companies offer life insurance plans to individuals up to 60 years of age. However, when you buy life insurance at a later age, the premium is going to be much higher. This is because age plays a major factor in determining the premium of your life insurance. To get an estimate of the premium you would have to pay for buying life insurance at an older age, use a life insurance premium calculator.
Myth 5: Payout will be denied or will be taxed
When you are buying life insurance, ensure that you buy one from a reputed company. Check the claim settlement ratio (CSR) of the insurance company before buying the policy. The higher the ratio is, the more claims the company has settled of their existing policyholders. It is always advisable to choose an insurance provider whose CSR is higher than 95%. Also, the payout that the nominee receives is exempt from taxes according to Section 10 (10D) of the Income Tax Act.
Myth 6: Life insurance is an expensive purchase
Once you understand what a life insurance policy is and how important it is, the next step is going ahead with the purchase. While traditional life insurance policies may seem an expensive option for huge coverage, nowadays there are several affordable options available as well. There are several affordable plans like term insurance policies which provide huge coverage for an affordable premium.
The above six myths are commonly associated with life insurance and hence, needed to be debunked. Ensure that when you buy a life insurance policy, you do not fall for these myths and make an informed decision.
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