Insurance penetration is approximately 4% in India, which is among the lowest across the world. Some people consider life insurance expensive, wherein the premium can burn a hole in their pockets. A few others do not want to acknowledge the uncertainty of life or think of their family’s long-term financial future in their absence.
Another reason for the lower penetration is that many people think life insurance is confusing with a large number of available options. Moreover, there are various misconceptions about life insurance, which discourage people from investing in it.
Before debunking the myths about insurance, let us first understand what is term insurance. A term plan is a pure life cover that pays the benefits to your nominees in case something untoward happens with you during the policy’s duration. Here are five myths about term insurance that you must not believe:
1. As there are no survival benefits, term plans are a waste
Term plans pay the death benefit to your nominees in your untimely absence. This sum helps to ensure their financial security in an unfortunate circumstance. However, these plans do not pay any survival or maturity benefits, which is why you may think that the premiums paid for these are wasted. However, if you are the sole earning member of your family, your absence may result in monetary distress for your loved ones. Additionally, if you have any outstanding liability like a home loan or car loan, the responsibility of its repayment falls on your family when you are not with them. Without term insurance benefits, your family may be unable to repay the debts and meet their regular expenses.
2. Term plans are expensive
Traditional insurance policies like an endowment or money back plan are costly, as these combine life coverage and investments. However, term plans are pure life covers and are one of the most reasonable types of life insurance policies. You can easily avail of a higher sum assured (SA) at a nominal premium, especially when you are young and healthy.
3. SA should be equal to your annual income
This is another common myth, which must be debunked. Your family would have a certain lifestyle, and maintaining the same when you are not around requires sufficient coverage. While calculating the SA, in addition to your current income, consider the rise in the future expenses due to inflation, your family’s financial goals like children’s education, and any pending monetary obligations. Generally, the term insurance benefits should be between 15 to 20 times your yearly earnings to secure your family’s economic well-being.
4. You do not need insurance at a young age
If you are young and single, you may have limited financial responsibilities. However, remember that your obligations will increase with age. The biggest advantage of buying term insurance at a younger age is that you can get a higher SA at a cost-effective premium. So, it is advisable to not believe in this myth.
5. Buying term insurance is a long process
When you buy term insurance online, you finish the entire procedure quickly, that too without any hassles. You can procure quotes from multiple insurers and compare the various policies to make your decision. Once you finalize the insurer, you can complete the online application form, the know-your-customer (KYC) process, and submit some basic documents to conclude the purchase. As the insurance company reduces its overheads and can save on the agent’s commission, you can buy term insurance online at a lower premium, which can give you value for money.
Insurers offer various term plans with several beneficial features. Compare the different policies to make an informed decision.