Life Insurance Myths Debunked

Decoding the Life Insurance Myths

Life insurance is a contract between a policyholder and a life  insurance company. Here, the policyholder pays premiums to an insurance provider. In return, the insurer pays a fixed sum to the nominees if the life assured dies within the policy tenure. Despite this simple concept, several myths persist about life insurance.

Below are common misconceptions dispelled with facts:

 

1. Life insurance is expensive

This is one of the biggest misconceptions about life insurance. Contrary to popular opinion, life insurance is not very expensive if you choose to purchase it when you’re young. The life insurance premiums only start to get costly as you age. In fact, pure term insurance, a type of life insurance, is highly cost-effective and offers high coverage at affordable premiums.

 

2. Life insurance can only be purchased offline or through an agent

Despite all the technological advancements of this age, many people still believe that life insurance can only be purchased offline or through an agent. This, however, is simply not true.

You can purchase life insurance plans online by visiting the insurance service provider's website, completing the appropriate application, and paying the premium online. In fact, some insurers even quote lower premiums for online insurance plans.

 

3. Life insurance claims are frequently rejected

This again is one of many life insurance myths that are simply untrue. As long as the cause of death of the policyholder is covered under a life insurance plan’s terms and conditions, and there is no valid reason to reject a claim, the claim will be accepted.

There may be some common reasons for a claim to be rejected. Some of them are: if there’s a mistake or omission in filing the claim application and its relevant documents, the claim may be rejected. However, if there’s no mistake or omission while filing the insurance claim papers, it will be accepted, and the funds will be disbursed to you. If any material facts were hidden at the time the policy was taken out, the claim may be rejected, etc.

 

4. All life insurance plans are the same

While all life insurance plans may look the same, reading into the Sales brochure will tell you that it is not so. Each type of life insurance varies from one another in terms of their features, the benefits they provide, their approach to savings or investment, and the premiums that they charge.

For instance, term insurance and an endowment plan, while both of them provide death benefits, are not one and the same since a pure term insurance plan doesn’t provide maturity benefits, while an endowment plan does.

 

5. Life insurance is useful only for tax-saving purposes

This is another misconception about life insurance. Contrary to popular opinion, life insurance is not just helpful in saving tax, although it is one of the many benefits that it provides.

In fact, a life insurance plan is also a preferred tool used to provide financial protection to one’s family. Additionally, some life insurance plans also combine insurance with savings and market-linked investment, providing you with an avenue to create market-linked wealth in the long term. With so many benefits on offer, treating it solely for tax-saving purposes is a myth that is still propagated today.

 

6. Young individuals don’t require life insurance

This has consistently been one of the reasons that young individuals give for not investing in a life insurance plan. They feel that since they’re young and of good health, paying life insurance premiums is something that’s of very little use.

However, what they fail to realise is that life can be quite uncertain and that tragedy can strike at any time. Life insurance is all about accounting for this uncertainty by providing one’s family with adequate financial protection in the event of the said individual’s unfortunate demise.

That’s not all. Purchasing a life insurance plan when you’re young tends to be more affordable than when you’re older. This is all the more reason why young individuals and professionals may invest in life insurance.

 

7.Older people cannot buy life insurance

This is one of the most common misbeliefs that older people cannot buy an insurance product. However, they can purchase plans like , immediate annuity plans. Their families or spouses continue to receive financial support after their demise. 

 

8. Getting life insurance is complicated

Buying life insurance has become more convenient with the availability of online platforms. These platforms allow you to compare plans, calculate premiums, complete application forms, upload KYC documents, and make payments from one place. Alongside traditional offline channels, this digital approach offers an additional way to explore and manage life insurance at your own pace, making the overall process more accessible and streamlined.

 

Key Takeaways

•  
• Addressing common life insurance myths reveals that buying coverage at a young age  can be  cost-effective as premiums are usually lower for younger individuals.
• Different life insurance plans serve distinct purposes for eg-  Term, endowment, and whole life plans  vary in benefits.
• Claims are rarely rejected when applications are accurate, complete, and material facts are disclosed.

 

Conclusion

With these insurance myths debunked, you can examine the necessary aspects with greater precision and plan your finances more effectively. Compare plans, understand coverage, and choose the right policy. Addressing these misconceptions can now empower you to protect your family by turning uncertainty into actions and making confident decisions.

 

FAQs

 

1. How does life insurance protect dependents and family members?

Life insurance provides a predetermined sum assured to nominees  in case of the life assured’s death. This amount can help the dependents and family members cover liabilities, living expenses, and future financial goals.

 

2. Can young and healthy individuals benefit from life insurance?

Young and healthy individuals can benefit from life insurance. Purchasing a term life insurance policy early locks in lower premiums and ensures coverage even if health declines later.

 

3. Are all life insurance plans suitable for every individual?

The suitability of any plan depends on goals, budget, risk appetite, and the financial needs of the individual and their family. You can select from plans like term, whole life, endowment,ULIP, money-back, retirement, and child insurance plans  to match your requirements.