Everyone knows it’s important to plan for certain things that will happen in life. Fewer people understand how to use life insurance products as a comprehensive tool for these things that will happen in life.
One reason for this is the many myths people have about life insurance. Here are 10 of the most common life insurance myths:
Myth 1: Life insurance can be used only after I pass away.
What is life insurance? It is a way to deal with risks. How would you pay your bills if you lived to be 90 and didn’t work after age 60? Insurance can help you secure your future financially. There are life insurance plans that come with financial payouts, that could help during retirement. You will always be better off if you buy the right insurance product at the right time based on your need-suitability assessment.
Myth 2: Only the person who buys the policy can have it in their name.
Anyone who is not a minor and has a steady income can buy a policy for themselves or their family. Some insurance companies offer joint insurance policies and child plans.
Myth 3: If I’m young, single, and healthy, I do not need insurance.
Life insurance is one thing that you can’t buy when you need it. You’ll need to buy it before you need it. The best time to purchase life insurance is when you are young because the premiums are lower, and you can get a lot of coverage for very little money.
If you have a student or personal loan, you can protect it from becoming a burden on your parents if you expire, get sick, or become disabled. Your policy can protect your family obligations and pay for your health-related and retirement costs as you age.
Myth 4: Since I’m covered by my company, I don’t need a separate policy.
The company you work for will cover you only as long as you work there. When you leave your job or retire, the policy ends. They might even cancel the policy or cut the benefits at any time. If that happens, you’ll be stuck when you need your insurance the most.
Myth 5: The only kind of life insurance is term insurance
Life insurance companies offer a wide range of products, such as traditional savings products, unit-linked insurance plans, and pension products.
Myth 6: It’s expensive to buy life insurance
The premium for life insurance is the most flexible premium you can find. It depends on several things and can be changed to fit your ability to pay premiums and gradually rise. You can always start with a minor investment and add to your coverage as your income and responsibilities grow.
Myth 7: Other investments will give me better returns than life insurance
Life Insurance products have a lot of different features, such as market-linked returns, guaranteed returns, whole life cover, and so on. The main difference is that the money from most life insurance policies may not have taxes levied on. And taxes are subject to vary. The taxation is also different depending on the old and new tax regimes. Certain life insurance policies are usually long-term investments that offer competitive risk-adjusted returns over time compared to other asset classes.
Myth 8: ULIP isn’t a good investment because it’s expensive.
In the long run, ULIP protects you and helps you build wealth. You can add to your ULIP policy as your needs change, giving it more flexibility and customisation. Within the same policy, it’s easy to switch between debt and stock funds as your needs change. This lets you invest in different assets under the same policy without worrying about taxes. ULIP policies differ from other types of insurance because they can be set up as whole-life policies and products that build up and pay out money.
Myth 9: I can’t get insurance because I’m too old or have a condition that has been around for a while.
When pricing a pure risk policy (term), assumptions are made about the person’s health. So, if a person’s age or health condition is not ideal, they will need to be charged more to cover the higher risk. If something is outside the range, it may not be a risk that can be priced.
Myth 10: It’s hard to settle a claim, and the insurance company can refuse to pay or keep some money.
The company will pay claims on policies that are already in place. The policy is only as good as the information the customer gives and as long as the premiums are paid on time.
Every family and person has different needs when it comes to money. Take the help of a life insurance premium calculator to help you decide on the best plan for you.