7 Common Life Insurance Myths Debunked

Life insurance is a contract between an insurer and a policyholder. An insurer guarantees a sum assured to the beneficiary or nominee upon the policyholder's unfortunate demise in return for the premiums paid. In simple words, life insurance provides financial security to the insured's dependents so that they continue living the same lifestyle without any compromises due to the financial instability caused because of the loss of an earning member.

Here are 7 most common life insurance myths:

1. If I am young, healthy, and single, I do not need life insurance:

You cannot buy life insurance when the need arises, and it needs to be bought for the future when you might need it. Contrary to what many individuals believe, the best time to buy a life insurance policy is when you are young and healthy, as you can get maximum coverage at an affordable premium.

Life insurance is not a product only for those with families. If you are single, you can have certain unpaid loans like an education loan, personal loan, car loan, etc., which in case of an unfortunate event, becomes a financial burden to your parents. Moreover, certain diseases and disabilities can stop you from your work temporarily or permanently, which may result in loss of income. In such challenging situations, having sufficient life insurance coverage can provide financial protection to your family.

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2. Life insurance is expensive:

There are a plethora of life insurance policies available in the market. While some insurers may charge a high premium, with proper research, you can find the life insurance policy that fits your budget and provides the required coverage. Term insurance, which is the purest form of life insurance, offers sufficient coverage to meet your family's financial requirements in your absence at a very low premium. For example, a 30-year-old can get a term plan of Rs 1 Crore for a yearly premium of around Rs 10,000.

3. Life insurance does not generate good returns, and hence I should not invest in it:

Banks and agents promote and sell life insurance as an investment product. Hence, many individuals consider buying life insurance to meet their financial goals, such as a child's education, retirement, child's marriage, etc. However, such investment-cum-insurance plans may neither generate inflation-beating returns nor provide adequate life insurance cover. Nowadays, there is increased awareness about mutual fund investment, and many investors think they can generate high returns through equity mutual funds and hence avoid investing in life insurance. While it is true that investment-cum-insurance plans may not fulfil your financial goals, it is important to understand that they should not be considered as an investment tool. You can invest in carefully selected equity mutual funds to achieve your investment objectives, but it does not provide you with life insurance coverage. Hence, along with your other investments, it is advisable to buy a sufficient term life insurance cover, which will take care of your family's financial requirements in case of your unfortunate demise.

4. I do not need life insurance because I am not a breadwinner:

It is a common belief that only the breadwinner of the family needs to be covered by a life insurance plan. However, everyone in the family, irrespective of their earning status, has a role to play in the house. If you are a stay-at-home wife/husband, you must be taking care of a lot of household needs. Managing these chores in your absence can be challenging and cost a pretty penny to the breadwinner as they will have to hire help. While the emotional loss in such a case is irreversible, adequate life insurance can help the family manage their lives in your absence.

5. I do not need to buy a life insurance policy separately because my employer covers me:

Corporate life insurance may be sufficient in some cases, especially if you are a part of higher management. However, bear in mind that corporate life insurance is valid only until you work with the same company. In case you switch your job for a better opportunity, which is a common phenomenon, your existing group insurance cover will be void, and you will have to restart with a new group insurance plan, depending on the terms and conditions of the new employer. Furthermore, many corporate life insurance plans do not offer sufficient coverage that can take care of your unpaid debts and your family's future financial needs. Hence, it makes sense to assess your life insurance needs and make sure you buy adequate life insurance coverage.

6. I should look for the cheapest life insurance plan:

While doing your research and comparing different policies to make sure you get maximum coverage at a lower premium is important, it is equally crucial to check the other important parameters. While buying the life insurance policy, you should check the plan features, benefits, convenience to buy and renew the policy, customer service, claim settlement ratio, customer reviews, and company goodwill. Buying the cheapest policy will not serve the purpose of buying life insurance if you are not getting proper customer service or your claim does not get settled.

7. Buying a life insurance policy online is not safe:

Although many people prefer the online purchase of life insurance, some people still believe that buying online life insurance is not safe. This misconception has been built due to the increased number of online frauds. You indeed need to take necessary precautions when making an online purchase, like making sure you are buying from the insurer's authentic website, understanding the product and terms and conditions, choosing a secured network to make the payment, etc. Buying an online life insurance plan has several benefits: convenience to compare different plans, quick and easy buying process, lower premium, etc. Besides, an insurance agent can manipulate you to buy a policy that offers them a higher commission and may not disclose all the terms and conditions in order to make a sale. But when buying an online life insurance policy, you will be able to see all the policy details online.

To conclude:

Now that you know the common life insurance myths do not believe in them when buying a life insurance policy. Make sure you properly compare different life insurance plans, carefully read the policy wording and terms and conditions, and buy a policy that suits you the best. Knowing all these misconceptions will help you be clear in your thoughts and make an informed decision when buying and renewing your policy and making a claim.

Warm Regards,
Ketki Jadhav
Content Writer