Do you know misconceptions about life insurance policies prevent most consumers from considering them as important financial planning tools? However, life insurance is an important financial contingency plan that protects your loved ones from future financial difficulties. It can also be used to supplement your income after retirement or if you are unable to work due to some injury or illness. Here are some common misunderstandings about life insurance policies that will be debunked in this post so that you can gain a better understanding of their benefits.
Myth 1: Term insurance is only for those with dependents.
Some people feel that term insurance is only necessary if you have dependents, such as children or elderly parents. However, if you have any debt, such as a mortgage or a student loan, Term Insurance policy can provide a safety net to ensure that your loved ones are not burdened by your bills if you die.
Myth 2: Life insurance is intended only for tax savings.
It is indeed true that you could get a tax deduction under Section 80C, but its benefits go beyond the tax benefits it offers. In your absence, the payout from your life insurance plan or term life insurance will meet the financial needs of your family. The corpus that your family will get after your demise will help them to build a fund for their future financial objectives.
Myth 3: Payout from life insurance will be received only after the policyholder’s death.
Depending on the type of life insurance plan chosen by the policyholder, term life insurance plans can be useful in several situations, in addition to providing a financial safety net for your loved ones. Retirement plans provide you with financial independence in your latter years of life. Term insurance policy with critical illness riders help cover the high costs of medical treatment. You can also use endowment plans to grow assets. Not only your nominee but also you can benefit from a timely investment in the appropriate life insurance product. As such, there is no right life insurance plan; it ultimately boils down to your specific financial objectives.
Myth 4: Young and healthy individuals do not need life insurance.
Life is full of uncertainties. Even a young individual in excellent health can be killed in an accident. In the early years of your employment, it is not possible to establish a big corpus from your savings alone. This is where life insurance ensures that your family is not left without funds. Furthermore, young people pay a smaller premium than they would when they are older. The best time to purchase term insurance for smokers or life insurance is while you are young and simultaneously earning. This allows you to acquire comprehensive coverage at a reduced rate.
Myth 5: Only wealthy individuals can afford life insurance.
Insurance policies today provide comprehensive coverage at reasonable rates. You can visit any website that compares different insurance plans, such as term insurance for smokers and non-smokers, and choose one that aligns with your financial objectives. You can begin with a lower sum assured & gradually raise coverage as your income grows. Nowadays, you can get good coverage at a reasonable cost from different insurance providers.
Myth 6: My current employer provides insurance coverage, and it is enough
Do you know the coverage provided by your employer can only be taken advantage of during the duration of your employment? In case you change jobs or retire from your current job, the coverage provided by your employer will be cancelled. Moreover, the insurance coverage provided by the company may not be sufficient to meet your family’s future demands. It is suggested that you carry term life insurance coverage of at least ten times your annual salary and take into account the inflation rate.
Myth 7: The payout can be taxed or denied without any reason
Before purchasing a policy, inquire about your insurance provider’s claim settlement ratio (CSR) and solvency ratio. If the insurance provider comes with a higher settlement ratio, it provides greater certainty that the company will fulfil its consumers’ demands. It is essential to choose a life insurance provider with a long-term CSR of more than 95%. This number implies that the insurance company settles at least 95 out of 100 insurance claims and is, hence, trustworthy. You can check the insurance provider’s CSR on the IRDAI website. In addition, you must state all of your medical issues while filling out your proposal form. It will keep your nominee’s claim from being disputed later. According to the Income Tax Act of 1961, death benefits from term life insurance products are not taxed if the beneficiary does not earn additional interest on the payout.
Myth 8: Older folks cannot purchase life insurance.
Many companies provide insurance plans that older people can purchase. Retirement plans are structured in a way that gives seniors financial independence even when their salaries stop. They can put a lump sum into an Immediate Annuity Plan and begin receiving their pension immediately. Their spouse can continue to receive the pension after their death. Senior citizens can also purchase whole life insurance plans, which provide coverage for their whole lives. Their loved ones will receive death benefits and are always financially secure.
Myth 9: Getting life insurance can be tricky
The internet has made every part of our lives easier, including acquiring the right term insurance for smokers. You do not need to rely on agents or wait for appointments with your insurer to get the same. After comparing insurers online, all you have to do is go to the web portal of the insurance company of your choice. Online calculators can help you calculate the premium you’ll need to pay. Then, you’ll have to answer some basic questions about your health, personal preferences, and profession. Following that, you may safely submit your KYC documents and make an online payment to simply get term insurance from the comfort of your own home.
It is critical to carefully examine your family’s financial demands and conduct online research to find the best insurance policy for your situation. The idea is to not fall for the myths listed above. If the reason for you not getting the term insurance is because you smoke, you should know that you can get term insurance for smokers by paying a bit more for coverage than non-smokers. Remember that no matter your age or savings, protecting your family with life insurance is always a sensible decision.