In view of the several myths about life Insurance, many ask themselves ‘Do I really need Life Insurance’?
People believe that Life Insurance is merely an instrument to save tax and consequently do not give it enough importance or do not take adequate protection.
Most life insurance agents are looked down upon and considered as persons who are out to make money from you. Nothing can be further from the truth. Having an adequate life insurance policy is critical.
Life insurance is a grossly misunderstood product with all kinds of myths and misconceptions accompanying it. Some of them are briefly listed here with a suitable clarification:
Most Widespread Myths Related to Life Insurance
Myths Related to Life Insurance #1
Life Insurance will be only beneficial to my family members after my death: To some extent this may be true, but the other benefits are usually overlooked.
While it is true that your dependent family members will have a substantial amount of money after you are not there. However, when you outlive the term of the life insurance, you will benefit the most as you have created a corpus that can ensure you a quality life, probably for the rest of your days.
As you grow older, medical expenses can be exorbitant. But, with this kind of a life insurance you need not worry as all your needs will be taken care of and you can live a happy retired life.
Myths Related to Life Insurance #2
The extent of my life insurance must be approximately twice the amount of my annual income: Each person has a unique requirement. There is no fixed or common rule to determine the amount of insurance you may need.
It can be very different for different people. You may need money to pay off the long term loan on your house or car. There can be monthly expenses that your family may need after your death, along with the costs of your funeral.
There can be hospital bills to be paid in the unfortunate event that you needed hospitalization. You may need professional help with regards to a detailed analysis to arrive at an amount you need to be insured for.
The age old thumb rule that the amount of your insurance must be twice your annual salary is no longer valid.
Myths Related to Life Insurance #3
I am only 30 years old and still single, life insurance is a waste of money in my case: The truth is that the earlier you start investing in a life insurance policy the more beneficial it will it be in the long run.
Primarily, the premium you pay today will be much less than a policy taken at a later date. Besides, you enjoy the benefit of being insured over a much longer period of time. Also, the amount of premium increases rapidly as you get older.
Myths Related to Life Insurance #4
All the premiums I pay towards a life insurance policy are income tax deductible and this is the most important factor to consider.
While it is true that you get some income tax rebates on your life insurance policy, but it is insignificant as compared to the advantages your beneficiaries will be provided when you are no more, especially, if they are dependent on you.
They will get a substantial amount that will see them meet their daily needs, maybe all through their lives.
Myths Related to Life Insurance #5
Life Insurance is for everybody including your dependent husband/wife and children: While this may be true, it is most important that the earning member of the family be insured first.
In the unfortunate case of loss of life or a permanent disability, the dependents will benefit from the sum insured for.
You must have a personal life insurance cover where your dependents should be made the nominees.
Alternate insurance plans can be preferably more beneficial, where your spouse and children are also insured under different schemes.
Myths Related to Life Insurance #6
Some people say it’s not important to read the fine print of your life insurance policy: In reality, understanding your life insurance policy in detail is vital.
You must go through the salient features and the applied caveats, in order that you or your nominees are not left disillusioned at the time of making a claim.
Some Insurance policies can be worded in a very tricky manner and can imply different interpretations. Never take anything for granted. Also, deal with an insurance company with a good track record of honoring their claims.
Myths Related to Life Insurance #7
Another misinformed school of thought is that group insurance is more than adequate to cover you in case of any catastrophe: This applies to people who are salaried employees of an employer.
This insurance is valid only till such time that you are still working. The day you cease to be employed with the same company or employer or you prefer switching jobs for better prospects or that your employment is terminated for unforeseen circumstances, you will be devoid of any insurance. Having an individual life insurance is critical.
Myths Related to Life Insurance #8
Life Insurance is advantageous only after your death: There are different kinds of life insurances offered by different insurers to meet your specific needs.
You can opt for a term insurance that will keep you insured for a pre-determined period of time. These could be pure term plans or in the form of ULIPS (unit linked insurance plans).
There are some endowment plans that protect you for the period specified by you. In case you outlive this period, you are entitled to a consolidated amount that will make life easier for you in case of a mishap.
You can initially start with a term plan as the premium is low and easily affordable. Gradually you can always add to your insurance policy whenever you may desire.
Importantly, you must consider investing in a life insurance to safeguard your dependents after you are no more. Ideally, do not look for any returns in your lifetime.
Now you do not have to ask ‘Do I really need a life insurance’. YES, YOU DO!
However, in your own best interest, be choosy about the type of insurance that most suits your needs and the quality of the insuring companies that you associate with. You may have to do a little research, but in the long run, it will be more than worth it.
It is obvious that most people are not savvy enough with the life insurance sector and often get deceived by ignorant agents or so called ill-informed financial advisors. Remember, they always have their own vested interest at heart. Be wary of them.