Understanding Myths & Facts about Term Insurance

People usually take the decision of buying or not buying life insurance being influenced by opinions shared by relatives or family members. But before believing, you must be sure that what you heard is true. In this blog, we will focus on some commonly believed facts & myths about term insurance.

10 Popular Myths about Term Insurance

Myth 1- I am covered in group life insurance. I don’t need another term cover

Fact:

The truth is that you will be covered under group life insurance until you are employed with a particular firm. Once you left the company, your life cover ceases and in this scenario, you need to buy a separate term plan to get yourself covered against the uncertainties of life.

Moreover, a group insurance plan may be able to fit your life cover needs, as you may get only the basic cover. Thus, it’s wise to buy a separate term life cover, in addition to a group insurance scheme. You need to take the right life cover to provide financial cover for your family & loved ones.

Myth 2- Stay-at-home does not require life insurance

Fact:

In reality, term insurance is equally important for staying a home spouse. Usually, the life insurance policies are bought by employed people. A stay-at-home individual may not be generating income, however, you must assess expenses that the family would have to bear in the event of his/ her demise.

In case of the untimely death of a stay-at-home partner, the working partner has to give more time and efforts at home which would result to take some time off from work. You need to hire a domestic worker to take care of household tasks. So, there are emotional and financial implications that you and your family have to be borne, in case of the death of a stay-home spouse. To cover the family against financial squeeze, it’s advisable to get life cover for all family members.

Myth 3- A term coverage of 2 times of salary will be enough

Fact:

Under term insurance, you need to choose a sum assured to cater future financial needs of the dependents taking into account the cost of living. To cut off in premiums, people usually choose less coverage resulting in a life cover that would not suffice to meet all financial requirements of family members and dependents.

The amount of term insurance cover however depends on your specific situation, a coverage of twice the salary would not be sufficient. It is advised to opt for a coverage amount that is 15-20 times the annual income.

Myth 4- I am investing in other schemes, instead of buying life insurance

Fact:

Although various investment avenues offer returns on investments, it doesn’t provide cover against life risks. Having life insurance coverage holds specific importance. It ensures financial protection for the family, in the event of your demise.

In case you want to build wealth along with the assurance of financial protection, you can simply choose to invest in ULIP. A ULIP comes with insurance plus an investment element that invests a portion of your invested money in the stock market and a small portion of your investment goes to offer life cover.

Myth 5- With Medical Condition, I will get a Life Cover

Fact:

If suffering from any medical ailments, an insurance company will only increase the premium amount considering the high life risk involved.

Moreover, you are advised to fully disclose all your medical history when applying for a term life cover. The insurance company wants to check how much risk they are involved in by offering you the life cover. While sending an application for term insurance cover, you need to make sure not to suppress material facts like medical history. If the company found out anything that you kept hidden from them, it can deny settling the claims for not disclosing the facts.

Myth 6- Insurance is for saving tax

Fact:

Well, it’s like a joke because if you are ready to buy term insurance then probably you are agreed to buy on the basis of benefits not for just only saving the tax. With the help of any policy you can save the tax successfully, but saving tax options with the policy is just like a “sell on 50% off”. You will pay the amount for that and in the return; you will get a concession of some amount. Insurance policy plays a vital role in saving taxes, but it couldn’t be the reason for saving taxes besides protecting your life and your life protection is a motive of term insurance.

Myth 7- Term life insurance plans are expensive

Fact:

There is a difference between Insurance policy & the Stock market, as the stock market’s demand rise, its price also rises. But in the case of insurance policy, it’s quite different because term life policy only charges what they are providing with the plan. Like as, coverage of the plan and benefits of the plan. Insurance is not like any seasonal fruit, with the coming of the season the fruit becomes expensive, and with the passing season, it becomes cheaper. Now a day, you can buy term life insurance for just Rs 27.78/day to Rs 55.41/day and it doesn’t seem that it’s very expensive because many of you must have spent money by smoking every day.

Myth 8- Insurance will benefit only after my death

Fact:

The rumor market is always hot; what if anyone said to you that term life insurance is for protecting your life? A term policy is beneficial for you while you are living your life, and term insurance can make your death beneficial too. There is coverage that comes under the term policy, death benefit and under this benefit, your family will get financial help from your insurance company.  But it doesn’t mean that insurance will be beneficial after death, but it can make your death valuable and beneficial for your family.

Myth 9- Buying term life insurance process is lengthy

Fact:

However, this thing was a big deal till yesterday but in today’s time, it has become easy for you to do paperwork. Before digitization, you had to sit with the agent and need to understand the policy and then go to the insurance company and complete the paperwork the policy will come after 1-2 days, but in today’s time, with the help of the internet, you also get every information about the policy and there is no much effort to buy the policy.

Myth 10- I’m single and don’t have any dependents, therefore I don’t need any coverage

Fact:

As young as you will buy the policy, it’ll much beneficial for you because as per policy “the younger you will buy the policy the cheaper you will get the policy and as old as you will buy the policy, the expenses you will get”. If you are young and earning well, then you should opt for the policy because it’ll get cheaper with time and also you’ll marry then you can transfer it from individual to family floater plan.

You never want to put the financial security of your family at risk, so buy a term life insurance cover. Also, consider the above-listed points prior to buying a term plan.