Life insurance is just like an umbrella. It can be an invaluable resource when a storm hits. The life cover ensures that the policyholder's dependents are financially secured in case of any contingency involving human life. However, despite its many merits, the proliferation of life insurance plans among the general population is abysmally low. As per data, in the fiscal year 2021, India's life insurance outreach stood at about three per cent.
One principal reason for low outreach is the misconceptions among a section of society about what it means to be a life insurer and exactly how companies put these products together.
The Need For Life Insurance
Life insurance is required for anyone who is the principal breadwinner and has dependent family members to care for.
Though it is impossible to place a value on any person's life, a monetary amount based on future income loss could be calculated. Furthermore, if the policyholder dies during the plan's term, the insurer will provide financial assistance to the beneficiary as a lump sum payment called the death benefit. However, people have reservations about buying life insurance policies despite such benefits due to certain misapprehensions.
What Are the Common Misconceptions About Buying Life Insurance?
Some of the misunderstandings about life insurance plans are listed below.
Myth 1: Life Insurance is only meant for tax savings.
Fact: Life insurance offers you the security of knowing what your loved ones would receive if you were to pass away suddenly. In addition, it also provides tax benefits under Section 80C of the IT Act. With an insurance plan, you can guarantee that your family is financially secure even if you are not present.
Myth 2: Young, healthy people, do not require life insurance.
Fact: Most people are too ignorant of the need to buy life insurance because of their good health and young age. However, Covid has shown that even people in the prime of their lives can unexpectedly become sick and die. Therefore, young age is not a guarantee for a long and healthy living situation.
As a result, age is not a criterion for purchasing insurance coverage. The sooner you obtain the life insurance policy, the better equipped you will be to deal with any unfortunate life event.
Myth 3: Only Rich People Can Afford Life Insurance.
Fact: Today's insurance policies provide comprehensive coverage at an affordable cost. Additionally, you can purchase life insurance online by comparing various plans offered by different insurance providers and selecting the one that best meets your needs while being within your budget.
Myth 4: Corporate term plan is sufficient.
Fact: Company insurance is only accessible while they still employ you. Your coverage may be cancelled if you plan to change your job or retire. Additionally, the life insurance provided by your employer may not be adequate to meet the future financial requirements of your family. As a result, it is always a good idea to purchase a separate life insurance policy as soon as you start working.
Myth 5: Most policy payouts are declined.
Fact: It is a widespread misperception among the general public. However, it is critical to disclose your accurate medical status when purchasing coverage because it is a primary cause of claim settlement disputes.
Furthermore, before purchasing a policy, research your insurer's claim settlement and solvency ratio. Higher ratios create confidence that the company honours its commitment to policyholders. It is best to choose an insurance provider with a long-standing CSR of more than 95 per cent. You can check the CSR on the IRDAI website.
Misconceptions regarding life insurance policies prevent people from seeing them as valuable financial planning instruments. However, a life insurance policy is an essential financial backup plan that maintains the well-being of your dependent family members and helps them live a dignified life even in your absence.
