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Common Myths and Facts about Life Insurance

Last Updated: Jun 05, 2012 | 215 Views

Life insurance is a financial security for your family in case anything was to happen to you tomorrow. This importance of insurance has been stressed by various financial experts and is known by one and all. Yet, when it comes to taking a policy, investors are still shrouded with various misconceptions in their minds. Here’s clarifying some of the most common ones, to help one make better decisions and plan a much secure life.

Myth 1: I am still young. I don’t need insurance now.

Fact: The truth of life is that you never know when a calamity could strike. Thus it is never too early to get a life cover.  Besides the earlier you get insurance in your life, the cheaper it would be, as premiums increase with age.

Myth 2: Insurance needs are the same for all.

Fact: Insurance needs vary from person to person and they greatly depend on age, number of dependents, lifestyle expenses and annual income. For example, a single unmarried youngster would have lesser financial responsibilities and may just require a simple life cover, whereas a mid career individual may have additional responsibilities towards children, loans, etc… and thus require a plan with an asset protection. Catering to this diverse need of investors, insurance companies offer a range of products to suit individual needs.

Myth 3: Life Insurance is expensive. I can’t afford the regular premiums.

Fact: A life insurance cover is not all that expensive, when you consider the financial protection it offers in return. Pure life covers/term plans in fact are quite cost effective and premiums could be paid as per ones convenience, either monthly, quarterly or annually. Online term plans recently introduced by many insurance companies are much cheaper, owing to the absence of any agent in the buying process. IRDA’s cap on charges by insurance companies, have also made Unit Linked Plans cost lesser.

Myth 4: Life insurance is a financial product that is useful only to save taxes.

Fact: Most often agents sell insurance products as tax saving products rather than focusing on the element of protection they offer. The tax benefit on the insurance plan is an added advantage and not the prime reason why a plan should be bought. Insurance primarily protects your family and dependents if an unforeseen event were to happen.

Myth 5: Insurance is complicated to understand.

Fact: The market is flooded with products and their terms and jargons could seem pretty intimidating to most individuals. However, in reality, insurance and its working is easy to understand.  Insurance companies and their agents are most willing to clarify all doubts and queries which a policy buyer/holder has in mind. So in case of any concerns or issues you could approach them.

Myth 6: Claims from insurance companies are always delayed

Fact: Insurance companies don’t intentionally delay claims. They are required to carry out adequate checks and verify all documents to ensure the claim is genuine. The IRDA guidelines mandate insurance companies to settle claims within 30 days of receipt of all documents. In case the claim requires further verification, the insurance company has to complete its procedures within 6 months from receiving the written intimation of claim.

Myth 7: Life insurance is a waste of money as I seldom get back the premiums I have paid.

Fact: The primary aim of insurance is to protect your loved ones and ensure sure their financial well-being in case of an unforeseen event. Insurance is not an investment product but a contingency product where the benefits are applicable only in case such an event actually occurs. Though most of us like to believe that nothing is going to happen to us, it nevertheless is advisable to be prepared in case of any eventuality. The premiums that you pay go towards this financial protection that you would be giving your family.

 

Deepak Yohannan
Deepak Yohannan is the CEO of MyInsuranceClub. He enjoys writing on Personal Finance and contributes regularly on sites like Reuters & Moneycontrol. He is a strong proponent of online insurance and is often found pointlessly babbling about it!

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