Term life insurance has many advantages. But understanding term life insurance and its benefits means sifting through the myths surrounding it; and there are many myths about life insurance. These life insurance myths and misconceptions can result in too little coverage causing financial hardship for families suffering the loss of a loved one.
To avoid this from happening to you, we’ve taken a look at the most common misconceptions about life insurance to set the record straight–helping you to make the right life insurance choice for you and your family.
Myth #1: Life insurance is only for tax savings.
Tax deduction under Section 80C is not the only advantage of life insurance. In your absence, the payout from your life insurance will also cover the monetary needs of those who are dependent on you. The maturity benefits from your insurance product can act as a corpus for many future financial goals.
Myth #2: I’m young so odds are I won’t need life insurance.
Some people are gamblers by nature and choose to take their chances by skipping out on life insurance completely. Although it is unlikely you’ll die during your working years, you’re not insuring for what’s likely to happen but instead, for the worst-case scenario.
That’s why term life insurance is inexpensive for young, healthy people. Buying life insurance now means you’ll be providing financial security without spending a lot of money for it.
What’s more you may even be eligible for preferred life rates that mean the annual premiums are even less! Preferred rates are lower premiums – for the same coverage – offered by an insurer based on your health. The good news is that eligibility for preferred rates is common and could save you up to 30 per cent off the standard rate.
Myth #3: Life insurance will be useful only after the policyholder’s death
Depending on the type of life insurance plan selected and its specific features, apart from providing a financial safety net to your loved ones, life insurance plans can be useful in other situations as well. Retirement plans help you enjoy financial independence in the later years of your life. Term insurance plans with critical illness riders help meet the exorbitant expenses of medical treatments. You can also utilize endowment plans as asset-building tools. Not only your nominee, but even you can profit from a timely investment in the right life insurance product.
Myth #4: Payout will be denied or will be taxed
Look into the claim settlement ratio (CSR) and solvency ratio of your insurance provider before you purchase a policy. Higher ratios provide better assurance that the company will meet the claims of their customers. It is advisable to select an insurance company that has a longstanding CSR of over 95%. This value indicates that the company settles at least 95 out of 100 claims and is, thus, reliable. You can check the CSR of the insurance provider on IRDAI’s website. In addition to this, you must also disclose all your medical conditions at the time of filling up your proposal form. It will prevent your nominee’s claim from being refuted later.
Myth #5: I have life insurance through my job. I don’t need any more insurance coverage.
False. The truth is your life insurance coverage through your work may not be protecting yourself and your loved ones as much as you think. Review how much your employer-paid insurance provides and calculate whether this is enough to keep your family comfortable through the difficult times if you’re not around.
What’s more, when you leave your job for any reason, including retirement, your coverage usually stops.
Myth #6: It’s such a hassle to get life insurance.
Its not at all a big hassle to buy insurance. Just contact your agent, broker or check online and you can get your insurance policy quite quickly if you have someone to handle it for you.
From the time you marry, buy your first home, start a family and enjoy retirement, having life insurance means you and your family have the security knowing you can reach the long-term financial goals you have set out.
Life insurance policies provide you with customized coverage for your family’s needs. Comparing quotes on the Internet can help you find affordable life insurance that will protect you and your family in the years to come.