Life insurance is an invaluable financial safeguard that ensures your and your family’s financial well-being. Despite its critical role, several misconceptions about life insurance often stand in people’s way, which hinders them from making well-informed financial decisions.
In this blog post, we’re going to address some of the most common myths that surround life insurance and debunk those. By debunking these myths, we aim to empower you with a deeper understanding and the genuine value and benefits life insurance offers.
Myth Number 1: I don't need life insurance! I'm single, young, and healthy.
Whenever we hear the term “Life Insurance,” we often think of it as a product we will need in the future, and we plan to invest in it someday—but not today.
But you know what? Life is uncertain. Even those in the prime of their youth and health are not immune to fatal accidents. When you’re just starting your career, building a large pool of funds is not easy. In such cases, life insurance acts as a financial safety net for your family, ensuring they aren’t left in a financial bind.
Investing in life insurance early on, as soon as you begin earning, allows you to secure extensive coverage at a more affordable rate.
Myth Number 2: Your employer's insurance is all you need
Coverage through your employer lasts only as long as your employment does. Once you depart or retire from the company, your insurance ends. If the company faces financial difficulties, there’s a risk it might cancel or diminish your policy, leaving you vulnerable when you most require coverage.
While the insurance provided by your employer might seem adequate during your younger, healthier years, especially if you’re currently free of major responsibilities. Often, such employer-sponsored insurance only offers a death benefit, leaving you without financial support in retirement unless you have other savings or financial strategies in place.
To ensure you and your family’s financial security, it’s wise to obtain a customised insurance that’s tailored to your long-term requirements. Opt for a policy that provides financial stability throughout your life and ensures your family is taken care of financially should anything happen to you.
Myth number 3: Life Insurance is valuable only after the policyholder dies
Life insurance is much more than a death benefit. Depending on the chosen plan and its features, it can offer various other benefits to your family. For instance, retirement plans from life insurance can support your financial independence in old age.
Term insurance plans include critical illness riders which cover costly medical treatments. Endowment plans can be an effective way to accumulate assets. Thus, investing in life insurance is not just beneficial for your nominees but can also enhance your financial well-being during your lifetime.
Myth number 4: Holding health insurance is enough and you don’t need a life insurance
Life insurance and health insurance cater to distinct needs. Life insurance guarantees a death benefit to the nominees after the policyholder’s demise, providing financial security for loved ones left behind. Health insurance, in contrast, offers financial relief to the policyholders themselves in case of sickness, accidents, or particular health challenges, through direct financial assistance.
Both types of insurance play critical roles in a comprehensive financial plan and should be acquired promptly to ensure full coverage and peace of mind.
Myth number 5: Life Insurance policies are complicated and get rejected
Today, the internet has revolutionised every aspect of our lives. Gone are the days when you had to rely solely on agents. Before choosing an insurance policy, examine the claim settlement ratio and solvency ratio of the insurer.
Higher ratios indicate a stronger likelihood of the insurer fulfilling its claim obligations. Aim for an insurer with a consistent CSR above 95%. The CSR for any insurer can be verified on the IRDAI’s website.
Once you’ve compared insurance providers online, simply navigate to your chosen insurer’s website. Complete your KYC and purchase the policy. You can also complete this process on Floatr’s mobile app as well.
Conclusion
Financial planning involves setting several goals. One such goal is to secure your family’s future even when you’re no more. Hence, it’s important to grasp the reality behind myths about life insurance.
It’s important not to let false beliefs deter you from exploring the benefits of life insurance. You must dedicate time to research your options, seek advice from experts, and select a policy that best suits your individual needs and situation.
Frequently Asked Questions
Why should I consider life insurance if I’m young?
Even if you’re young, life insurance is crucial due to life’s unpredictability. It can provide a safety net for any future dependents, cover potential debts, and secure a lower premium rate early on.
How do I choose the right amount of life insurance coverage?
The ideal coverage amount varies per individual, but a common recommendation is to have a policy worth at least ten times your annual income.
What happens to my life insurance if I change jobs or retire?
Personal life insurance policies are not tied to your employment status, so they remain in effect regardless of job changes or retirement, as long as premiums are paid. However, life insurance through your employer ends when you leave the company.
Can older adults still buy life insurance?
Yes, many insurance companies offer life insurance products designed for older adults, including whole-life policies and immediate annuity plans for retirement.
How can I ensure my life insurance claim will not be denied?
To minimise the risk of a claim being denied, be truthful and thorough when applying for a policy. Disclose all relevant health information and lifestyle habits. Choosing a reputable insurer with a high claim settlement ratio also helps ensure that your policy will be honoured.
