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14 Most Common Myths about Term Life Insurance
Term insurance is one of the easiest and most affordable ways to secure your family's financial future. While there are multiple clear benefits of term insurance plans, there are still various myths that act as obstacles to opting for this critical protection plan.
You might be delaying buying that term insurance policy because you feel it's not meant for you or perhaps a waste of money.
Let's bust some term life insurance myths and unveil the truth behind them.
Table of Contents
Busting 14 Term Life Insurance Myths That You Shouldn’t Believe
Discussed below are some of the most common term insurance plan myths. Time to debunk them, once and for all!
Myth 1: It Is Too Early to Buy Term Insurance
Many people believe that term insurance is only needed once one reaches a certain age or upon reaching a significant life-changing event. The truth is that the younger you are, the lesser your premiums. It locks in low-cost premiums for long-term insurance coverage while ensuring financial security for your loved ones, no matter what may come your way.Myth 2: Term Insurance is a Waste of Money
Some argue that term insurance does not yield any returns versus other investment-linked insurance plans. But term insurance is devised purely for protection. While there is no maturity benefit, it leaves assured financial security for your dependents in case of your untimely death, which should be the primary purpose behind term insurance.Myth 3: Coverage Amount Can't Be Increased After Purchase
It is a misguided notion that a sum assured is a once-off event once the policy has been purchased. But, most term insurance providers will be quite flexible at certain key events like when somebody gets married or when they have a child, so you can very easily change your cover as your needs change.Myth 4: Term Insurance is Expensive
It is possible that the most common myth is that term insurance is expensive. Conversely, term insurance is one of the cheapest forms of life insurance for young persons. Premiums may be much cheaper compared to other forms of life insurance and thus can be afforded by many.Myth 5: Term Insurance Doesn't Cover Accidents
You might think term insurance only covers the natural death of a person, but most term plans usually cover accidental death. And riders for extra benefits in terms of accidents and so on are also available; hence, it provides complete protection.Myth 6: Term Insurance isn’t Needed if I Have Other Investments
Some people feel that investing in stocks, mutual funds, or real estate completely eliminates the need for term insurance. These investments are purely based on market risks and volatility. Term insurance provides guaranteed coverage and secures your family's future, irrespective of the market conditions.Myth 7: It’s Difficult to Switch Between Term Insurance Providers
Changing providers is a hassle for most people, but in today's competitive insurance market, it's relatively easier to switch policies. You can port to a better provider to switch benefits or premium structures based on changing needs.Myth 8: Only Breadwinners Need Term Insurance
While it is directly applicable to the breadwinner, stay-at-home spouses can contribute significantly to the economic stability of a family. Taking care of dependents meant that if they left, the family could potentially cover the cost of having someone to take their place or adjust to living without them.Myth 9: Term Insurance isn’t Suitable for Older People
In fact, term insurance bought at a younger age offers better premiums, but older people do not necessarily miss it, as there are many term insurance plans dedicated to senior citizens and provide them with adequate coverage at reasonable rates when one can buy it after passing all ages.Myth 10: All Term Insurance Plans are the Same
Not all term insurance plans are the same. There exist differences in some features and riders between different providers. Additionally, there are claim settlement ratios. You can choose plans with add-on benefits such as critical illness cover or premium waivers or accidental death benefits that suit your needs.Myth 11: Single People Don't Need Term Insurance
Even if you’re single, term insurance can benefit those who depend on you, like ageing parents or siblings. It ensures that their financial needs are met if something were to happen to you. Additionally, buying a policy early locks in low premiums for future benefits.Myth 12: Term Insurance is Only for Tax Savings
While tax benefits under Section 80C and 10(10D) of the Income Tax Act are an added advantage, the core purpose of term insurance is financial protection. Focusing solely on tax savings defeats the main objective of ensuring your family’s financial security.Myth 13: It is Difficult to Buy Term Insurance Online
It is still a common myth that purchasing a term insurance policy is tedious and that it is not possible online. On the contrary, most insurance companies allow you to buy term insurance online. In fact, it is more cost-effective as no intermediaries are involved.Myth 14: Term Insurance is Only Meant for Men
While statistically more men purchase term insurance plans, there is no good reason why women should not. They too have challenging financial obligations that make term insurance plans as essential for them. In fact, there has been an 80% increase in term insurance plan purchases by women in India since 2022.Why Research is Crucial Before Buying Term Insurance?
To purchase the best term insurance plan, proper research and comparison of different plans are so essential. Consider such factors like the claim settlement ratio of the insurer, additional rider options, premium flexibility, and customer reviews while thinking about each policy before you settle on any policy.
Common Challenges & Solutions When Buying Term Insurance
1. Identifying the Right Plan
The sheer options put buyers in a dilemma. Simplify the options for consumers by comparing plans according to claim settlement ratios, premium, and additional features.2. Affordability
While others worry about the premium becoming unaffordable, term life can be made to fit any budget.3. Understanding Policy Terminology
Many people find terms used in an insurance policy confusing. Clarify this from your insurer or advisor before buying.FAQs about Term Life Insurance Myths
Can I buy term insurance for my spouse or children?
Yes, most insurance companies do allow you to purchase term insurance for your spouse. Although you don't usually buy term insurance for children, some policies do offer family coverage for children.
What are the problems with term insurance?
Some of the common complaints include the fact that there is no return and the short coverage period. This is all taken care of by choosing the right riders and researching the right plans.
Is term insurance really useful?
Yes, term insurance is probably one of the most effective means of providing protection in monetary terms to the dependents at the cheapest rate.
What happens if term insurance is not claimed?
The money is paid out only if the policyholder survives the term. In a few policies, though, there are return-of-premium options, where the premiums are returned at the end of the policy term.
Does term insurance actually pay out?
If the policyholder dies during the term of the insurance policy, the amount assured is paid by the insurance company to the nominee. Of course, do select a high claim settlement ratio insurer to ensure prompt settlement.
Is it wise to buy term life insurance?
Buying term life insurance is an affordable and effective way to ensure that the financial future of your family is secured in the event of your untimely death.
Do we get money back in term insurance?
Term insurance generally does not offer maturity benefits. However, there are a few plans, such as Term Return of Premium (TROP) policies, that return the premium if the insured survives the term.
Do I need a high sum insured if I smoke occasionally?
Irrespective of whether you smoke regularly or occasionally, it is ideal to disclose this information to the insurer.
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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