5 Life Insurance Myths Debunked

Customer satisfaction has improved over the years in the life insurance industry, says a study conducted by market research firm IMRB International. This improvement is mainly attributed to the customer-friendly guidelines issued by the IRDA over the years and better turn-around times (TATs), said The Economic Times in May 2015. You might give wealth creation a priority over life insurance and think that savings will save you in times of need. However, life insurance is not an option and is a must-have for every working individual. It takes care of your family’s financial needs after your demise. You may run away from discussions about death but the fact remains that life is unpredictable Therefore, you must prepare yourself for any eventuality.

The Truth Behind Common Myths

Life insurance not only secures your family’s future but also offers insurance tax benefits. Isn’t that the icing on the cake? Life insurance tax benefits under the Income Tax Act include tax deductions of up to Rs 1.5 lakhs on premium payments per annum under section 80 C and tax exemptions on the sum assured under section 10(10D). Much like other investment products, life insurance also has its own share of myths associated with it. Given below are some common myths and the reality behind them.

1.      I am Too Young to Buy a Policy – Life is uncertain and can be cut short at any moment. This is true both for the young and old alike. The earlier you buy a policy, the better off you will be, given that the young and healthy are offered lower premium rates.

2.      My Company’s Policy is Good Enough – Most salaried individuals think that the policy offered by their company is good enough and they do not need a personal one. However, such policies are only applicable as long as you work for the company. Moreover, a company policy can fall short of meeting your family’s needs.

3.      Term Plans are Bad Products – Due to the absence of maturity/survival benefits, term plans are considered to be bad products. In reality, they are one of the most comprehensive products and offer among the highest covers at a low cost.

4.      I Should Buy a Policy on My Child’s Name – A lot of people think that the policy would ultimately benefit dependents, therefore it is best to buy a plan in one’s child’s name. However, it must be remembered that the loss of the earning member of a family might not be fulfilled by just catering to the needs of the child. Therefore, it is best that the breadwinner buys the plan in his name.

5.      It is a Tax Saving Instrument – Life insurance tax benefits is just one of the many benefits offered by the policy and not the primary. The sole purpose of life insurance is to cover your life and it must be bought keeping the same in mind.