Multiple myths exist regarding a life insurance policy. In order to arm you with facts, this article debunks some of the most widespread life insurance myths.
Myth 1: Life insurance is only helpful if I pass away
Fact 1: Life insurance is a risk reduction strategy. Risk must be connected to both dying and living. How would you handle your bills if you were to quit working at 60 and live to be 90? There are several ways to establish a corpus to support yourself in retirement, pay for medical costs, or increase your wealth.
Myth 2: I don’t need a separate policy because my employer already covers me.
Fact 2: You are only covered by your employer while you are an employee. When you are young, healthy, and free of obligations, employee insurance could be adequate. However, it won’t be sufficient to meet the demands of your future family, such as those related to children’s education, marriage, aged parents’ medical problems, the growing cost of living, etc. You should add another insurance policy that is tailored to your future needs.
Myth 3: I’m young, single, and healthy; why do I need insurance?
Fact 3: A life insurance policy must be purchased in anticipation of your requirement. There are various reasons why it should be purchased in youth. Because the premiums are cheaper and you may get a large life cover for a very low premium, the optimum time to buy a life insurance policy is while you’re young.
Myth 4: Life Insurance Is Expensive
Fact 4: Life insurance premium is very adaptable and may be progressively changed to fit your ability to pay the premium. The premium rate for any insurance, whether it be a pure risk product or a risk cum savings plan, is cheaper the younger you are. Get life insurance quotes for accurate info regarding premiums.
Myth 5: The Only Type of Life Insurance is Term Insurance
Fact 5: Term insurance protects against the possibility of passing away without leaving any financial security. To meet the varying risk management requirements of various client groups, life insurance firms provide a variety of products, such as conventional savings products, unit-linked products, and pension products.
Myth 6: I’m not eligible for insurance because I’m too old or have a pre-existing condition.
Fact 6: Older age might result in highly attractive annuities. When it comes to a pure risk policy (term), average assumptions about health conditions are used to determine product price. As a result, prices will need to be adjusted to reflect the increased risk when dealing with age and medical problems that fall outside the median or average.
Myth 7: I’ll make more money investing in things other than life insurance.
Fact 7: Life insurance plans provide life insurance tax benefits and include a variety of features that may be combined, including whole life insurance, guaranteed returns, market-linked returns, and risks related to mortality, morbidity, and longevity. Therefore, the buyer may not get clarity and a comprehensive view from comparing isolated features.
The majority of life insurance plans’ proceeds are tax-free, which is one of its distinguishing characteristics.
Myth 8: ULIP is a bad investment because it is expensive
Fact 8: ULIP provides long-term security as well as wealth building. The costs for modern ULIPs are remarkably cheap, and some even reimburse mortality or other fees that were deducted during the course of the policy’s term when it matures. With a ULIP, you may add flexibility and customisation to your policy as your needs change. According to your changing demands, you may simply swap between debt and equity funds inside the same policy. This eliminates any tax consequences from investing across several asset classes inside a single policy. Additionally, ULIPs permit tax-free partial cash withdrawals for unforeseen circumstances beyond the lock-in period, providing life insurance tax benefits throughout the policy’s actual duration.
Note: FY 2020-21 saw a new tax regime being introduced in addition to the already existing one. So, taxpayers can now choose either of the income tax regimes, according to the life insurance tax advantages they need, and pay tax accordingly.
Myth 9: The policy may only be purchased in the buyer’s name.
Fact 9: You can get a policy in your own name or the names of your spouse or children as long as you have a regular source of income and are not a minor. To cover both spouses under a single policy, some insurers provide combined insurance coverage. To secure the requirements of their children in the future, parents might contribute to a child plan. If the child is still a minor, the insurance coverage becomes theirs after they turn 18.
Myth 10: The insurance company might refuse to pay up or hold back a portion of a claim settlement.
Fact 10: An insurance provider will honour claims made under active policies as that’s their primary goal. Remember, an insurance policy is a contract made in the best possible faith in this situation. Therefore, insurance is only as good as the information that the consumer provides. A consistent premium payment schedule is also necessary to maintain the policy’s validity.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
Source link: https://www.forbes.com/advisor/in/life-insurance/10-life-insurance-myths-that-need-to-be-debunked
