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Top Myths And Facts About Life Insurance You Must Know

IndianMoney.com Research Team | Posted On Tuesday, January 01,2019, 05:21 PM

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Top Myths And Facts About Life Insurance You Must Know

 

 

In a life insurance plan, the insurer pays a sum assured called ‘death benefit’ to the beneficiary/nominee, if the insured dies within the term of the policy. The insured has to pay premiums periodically to keep the policy active. Unlike Term Insurance, Endowment Life Insurance offers cash value if the insured wishes to surrender the policy or the insured survives the term of the policy. Premiums are invested in fixed income securities to offer maturity value. You would be paid cash value if you surrender the policy.

As with other financial products, Life Insurance policies too have myths. Let’s have a look at top myths and facts on Life Insurance you must know:

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Top Myths And Facts About Life Insurance You Must Know

Myth 1 - A Stay-At-Home Spouse Does Not Require Life Insurance

This is wrong. The amount of work that a stay-at-home spouse does is huge! It is very expensive to hire someone to do all the household work that was being done by stay-at-home spouse. At the same time, it is a herculean task to do all the household work and then report to office. With the life insurance money, you could spend on children’s education and give them a better quality of life.

Myth 2 - My Company Has Included Me In Their Group Life Insurance. I Don’t Need Another Plan

You still need to avail an individual Life Insurance Plan. This is because your company’s group Life Insurance Policy stops when you change your employment. Group Life Insurance Policy covers only the basic needs and the benefits of group policies are very limited, which may not be enough to cover your family’s needs.

SEE ALSO: Insurance Tax Benefits For Women

Myth 3 - A Life Insurance Coverage That Is Twice My Salary Will Do

It is advisable to avail an insurance policy that is 15-20 times of your salary. The money must be enough so that family lives in reasonable comfort and debts like home loan or a car loan are repaid.

Myth 4 - I’m Better Off Investing Money In Other Schemes Rather Than Buying Life Insurance

The main purpose of you availing a Life Insurance Policy is to cover your family’s financial needs when you are not around. If your investments don’t serve the cause, then what’s the use? It’s good to avail a term life insurance plan for risk protection and invest the rest in equity or debt according to risk profile.

SEE ALSO: 7 Wrong Reasons for Availing Life Insurance

Myth 5 - With My Medical Condition, Nobody Is Going To Let Me Avail Life Insurance

No, you can still be insured. The premiums payable would be higher depending on your health conditions. This is because the insurers may be ready to bear higher risks for high premiums.

Myth 6 - Insurance Is For Saving Tax

Not really. Yes, Life insurance would give you tax benefits but the basic and foremost reason for availing a Life Insurance Policy is to secure your family’s financial needs when you are not around.

SEE ALSO: Know Endowment Life Plans

Myth 7 - Insurance Will Benefit Only After My Death

Life Insurance Policy would give a lump sum amount as ‘death benefit’ to the beneficiary on demise of the insured, within the term of the plan. You can always surrender your policy if it doesn’t match needs. It’s good to surrender early, rather than towards the end of the plan.

Myth 8 - I'm Single And Don't Have Any Dependents, Therefore I Don't Need Any Coverage

It’s good to avail a Life Insurance Policy at a young age as there would be minimal health related issues and you will be able to get policies at lower premiums. You are single now with no dependants. A term plan would benefit your family post-marriage. Be wise and avail Life Insurance at a young age.

SEE ALSO: Insurance Tax Benefits

Myth 9 - Life Insurance Is Far More Important Than Health Coverage

This is wrong! Health Insurance is equally important as it provides coverage for illness. You can avail critical illness riders with Life Insurance Policies. Avail a standalone critical illness plan, even if you have life insurance.

Bottom Line

In the modern World, it is important to understand the importance of Life Insurance and how it works. You need to be financially aware. It is crucial to financially secure your family’s future. Investments are good, but at the same time you need insurance to protect family on an untimely demise.

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