5 Life-Insurance Myths Busted
Buying life insurance is not a priority for many thanks to a few myths. Read up and get the security cover for your loved ones
A lot of people, especially young professionals, think that they would be wasting money by signing up for a life insurance policy. Others find the topic confusing, thanks to widespread misconceptions about different aspects of life cover. But since life insurance plays a pivotal role in protecting your loved ones, in case of any eventuality, it's important to separate fact from fiction.
Here are five popular myths and questions most investors come across when they think of life insurance.
Myth 1: Life insurance can be afforded only by the rich
Studies suggest that a sizeable number of Indians usually misjudge the cost of life insurance. According to a report by the Insurance Regulatory and Development Authority of India (IRDAI), every three out of four individuals which is 75 per cent of the population do not have life insurance. And what is more disheartening is that even those who have purchased a policy are assured of only about eight per cent of the amount their family would actually need to continue their standard of living after losing the breadwinner of the family.
But the reality remains that life insurance is actually affordable for most people, depending on the coverage you’re looking for. You can start with a policy that fits your budget, and you may be able to purchase additional coverage later on. Today, insurance plans offer an extensive coverage on affordable premiums. You can choose your payment frequency to suit your convenience. With proper research and the right advice, you can buy a policy that costs less than ₹8,000-10,000 annually for a cover of one crore rupees.
Myth 2: My employer provides life insurance, so I am covered
False. While you may be covered by a policy, it’s not the same thing as actually owning it. By opting for employer-provided coverage, your employer owns and controls the policy, not you. If your employer decides to cancel or reduce the benefit or you change your job, you will be without coverage.
Another consideration is coverage. Employers offering life insurance is certainly a handy perk, but it may not provide you adequate cover. Often, life insurance coverage provided by employers is limited to 1-2 times your annual salary. This amount wouldn’t be enough for a family to meet their basic needs in the event of being left without income.
Opting for an additional policy separately may provide you and your family with some much-needed peace of mind. Keep in mind that you generally need at least 5-8 times your income and some experts even recommend 10-12 times.
Myth 3: Only the breadwinners need life insurance
While it’s true that life insurance is essential for the person who provides the major part of the household income, there’s value and safety net in having insurance coverage for the spouse as well, with or without a job.
Imagine that you are the breadwinner and if something happens to the stay-at-home parent, how would you handle all the auxiliary expenses. There would be a sudden surge in household expenses. You may need to hire caretakers, etc. that could cost a lot of money. This is an insurable risk and homemakers should buy life insurance along with the breadwinner of the family! There are joint life insurance policies that one can explore.
Myth 4: I am young, single and healthy. I don’t need life insurance
It’s true that the young have little reason to fear death, but you are mistaken if you think that you don’t need insurance. Life insurance is a product you buy before you need it. Even if you are single and young and have no dependents, it is possible that you may have liabilities such as a student loan and an unfortunate event occurs? The burden of paying off your debts will fall on your loan’s guarantor.
While it may be tempting to delay a life insurance policy, taking a cover at a young age can help you save money in the long-term. As insurers will calculate your premiums based on their likelihood of paying out on the policy, purchasing cover when you’re younger and fully healthy could significantly cut the cost of your policy.
Myth 5: It is too much of a hassle to obtain life insurance
This might be one of the life insurance myths that may have had some truth to it but finding life insurance isn't as hard as you think. At least not now in the digital era. Knowing about a policy or buying one is a seamless experience.
Paper-based transactions and long forms are a thing of the past, and consumers can now rely on smartphones for information/feedback. You can scout online to find out what are your options and what’s best for you. All you have to do is provide basic information about yourself, including your height, weight, age, and gender. Once you have the quotes, you can choose what is right for you.
The right life insurance policy is one that meets your individual needs.