Popular Myths about Life Insurance.

Life insurance must be a part of every individual’s financial planning but one needs to debunk various age old myths attached in order to buy adequate life cover. Let us take a look at the top 10 popular myths associated with life insurance.

1. Life insurance is for older people: Many youngsters have a feeling that they may require a life insurance policy in the middle age or after 40 only. The fact that death is the ultimate reality of life and can happen to anyone irrespective of age, caste, creed or gender. The earlier one gets a life insurance cover; not only it is light on the purse but also increases the overall protective range for the individual.

2. I am single, so I do not need lifeinsurance: If you have no family or dependant you may want to still consider life insurance policy. Life insurance policies usually expire at the age of 60-65 years offering substantial returns to the insurer at their retirement period. With increasing life expectancy, life begins at 60 for a large number of people. Investing in life insurance can mean an added financial cushion for your retirement years and also saves you from tax burden during the earning years.

3. Life insurance is a tax saving instrument: Many people buy life insurance simply as a tax saving instrument. While it is true that life insurance offers tax benefits under section 80c of the Income Tax Act, the sole purpose of life insurance is to provide a protective cover in case of sudden death. Tax incentives and investment returns provided by life insurance policies must be considered as an add-on benefit, while one should also consider the cover, returns and other factors associated with it.

4. Company’s group insurance is good enough: Many salaried individuals do not look beyond the group insurance provided to them by their employer. Group insurance is good only as long as the individual is working with the company. In case of a change of job or a sudden red slip, the individual is completely devoid of any life insurance. Also in case a salaried individual plans to leave the job for self employment in his mid age, taking a life insurance in the 40’s can be an expensive proposition.

5. Term insurance offers no returns: A lot of people consider term insurance as a bad product and waste of money since they get no returns at the end of the tenure. What most of the people forget is that term insurance offers life insurance round the year at nominal prices bringing peace of mind to the individual and his or her family. The growing popularity of term insurance as a life insurance product is testimony to the fact that it is one of the better life insurance products available in the market today.

6. Insurance agent knows best: Many people think the life insurance agent in their best friend and can advise them to choose the best product for their case. The fact is that a large number of insurance agents are poorly trained and try to sell the most lucrative product which offers them a chance to compete their monthly targets than anything. As a customer for life insurance, one must do some homework about various insurance plans and schemes and not reply only on the advice of the insurance agent.

7. Savings bank account or credit card offers me life insurance: Some banks are offering free life insurance to their savings bank customers as well as credit card clients. Considering such life insurance as a protective cover is a big mistake and must be considered only as an added advantage of using the core banking services.

8. Buying life insurance in my kids name is a good idea: Many people think that since the life insurance policy would eventually help their dependent children or their spouse, they are better off taking the insurance in their name directly. Life insurance is an individual centric product and must be taken in the name of the earning member of the household always. Of course children and non working members of the family can be nominees and have independent life insurance policies as well.

9. Non liquidity of money doesn’t suit for me:  Some people try to keep away from life insurance policies due to the fact that money invested in policies are locked n for a certain period of time. They think that life insurance doesn't suit them as they don’t have the freedom to use the money when they have an emergency situation, It is true that there is lack of liquidity in life insurance, but consider the long term benefits and advantages of a life insurance policy, especially during times of an unforeseen mishap.  

10. Expectation of high returns: Some people have an unrealistic expectation of doubling up the invested money during maturity period, thinking life insurance policies are high return investment vehicle. This is wrong as many policy plans are not as attractive as equity investments or real estate investments. You cannot expect huge returns from your invested premiums, but the fact that helping and terms of unexpected mishaps, or retirement benefits is the main attraction of lifeinsurance policies.