Five Myths about Term Insurance

Being the purest form of life insurance, term insurance products are still trying hard to gain acceptance among the masses. Many still refuse to buy it, due to lack of understanding about the overall benefits it offers and all thanks to a few myths. Well, allow me to help you make an informed decision. In this article, we’ve debunked 5 popular term insurance myths to help you come to a decision:

Myth 1: “I am not going to die, I have just started my first job."

Young people believe they are super humans and nothing can harm them. They are full of energy, enthusiasm and can overcome anything that comes their way. They think buying a Term Insurance Plan is a complete waste of money. But, what happens if you are not there any longer? Have you thought about your parents who are dependent on you?

The burden of debt taken for completing your education would haunt them. The hope of a second income that makes your parents relax would just disappear. What about the liabilities that you might have created in the form of Auto Loan, Home Loan, Personal Loan, Credit Card Payments, etc?

Isn’t it time you gifted your parents a complete peace of mind even in your absence by buying a term insurance plan?

Myth 2: “My Life Cover should be equal to my current annual income.”

The primary purpose of a Term Insurance Plan is to substitute the loss of income arising from your death. If you buy a cover equal to only your present income, from the next year onwards, you will be forcing your loved ones to downgrade their standard of living. They will be forced by you to bring down their lifestyle.

As a thumb rule, your life cover amount should be 10 times your annual income. However, it is best to buy a life cover equal to your Human Life Value (HLV). HLV is an estimate of the financial value of your life. The HLV calculator is an ideal tool for measuring the exact amount of term insurance plan a person should opt for. The cover you choose should be adequate to replace your current and future income so that your family can continue to have the same lifestyle and cover any outstanding loans that you may have taken.

Myth 3: “Term insurance is expensive and a waste of money, as I will not get anything back.”

In today’s life insurance Market, each and every insurer is offering Term Insurance Plans to meet customer’s protection needs. With the advent of the online platform, term insurance plans have become very cheap and affordable. For most of us, term insurance premium/day would cost less than a cup of coffee.

So, can’t you sacrifice a cup of your daily coffee or evening snack to ensure safety of your family’s income needs? If you are still upbeat about not getting anything back if you survive the term of the plan here’s another way to make some money.

You can start a monthly SIP into a mutual fund plan for a small amount say Rs. 500/- per month for the entire duration of your chosen term insurance plan.

The money that you will earn from this investment would be far more than the total premiums you have paid for your term insurance plan.Add to it the tax exemptions you get for the invested amount and this sounds like a real sweet deal. Now that’s a smart way of protecting your family, making money and saving taxes!

Myth 4: “I cannot customize a term insurance plan to match my needs.”

Today’s term plans offer you a plethora of choices to meet your every need. You can customize them as per your current and future needs:

• Coverage Options: You cover yourself for a fixed lumpsum amount. If you are concerned about inflation affecting your cover amount, you can get an increasing cover of 5% or 10% p.a.of your chosen life cover amount. You also cover your spouse under the same term plan through Joint Life Option. If you want to increase your coverage amount in future you can opt for Life Stage Protection Option. You also get Term Insurance Plans that offer inbuilt benefits like Accidental Death & Disability, Terminal Illness, Critical Illness, Total and Permanent Disability, Waiver of Premium, etc.
• Death Benefit Pay-out Options: You can choose the manner in which your life cover (death benefit) would be paid to your nominees i.e. you can go for Lumpsum Pay-outs, Lumpsum + Annual Income, Monthly Income, Increasing Monthly / Annual Income, etc.
• Policy Term: You choose a policy term that best suits your needs, it can be as small as 5 years or as long as 40 years. Today you get term insurance plans with coverage for whole life too.
• Premium Payment Term: You get a choice on duration for which you wish to pay the premiums it can be either Single, Limited or even regular pay. You can also select the mode i.e. Annual, Half-yearly, Quarterly or Monthly.
• Comprehensive Coverage: Along with the base cover, you can opt for additional coverage for accident, disability and disease with riders. With so many choices you can create a comprehensive protection that takes care of all your current and future needs.

Myth 5: “Insurers always reject term insurance claims for some or the other reason.”

Insurance contracts are based on the principle of utmost good faith. You should fill the application form correctly without any errors, pay your premiums on time, this will minimize the chances of Insurer rejecting your claim. If a claimis denied by the insurance company, there is no need to worry. All one has to do is file an appeal with the IRDAI.IRDAI is the government body ruling the insurance industry in India. It keeps a close watch on the claims registered and ensures smooth reimbursement if found rightful. Many beneficiaries have already been compensated by the term insurance during unforeseen events.

So, what are you waiting for, get yourself protected right now! Term insurance ensures your loved ones maintain a dignified life style even in your absence.Remember, it is not for you,it is for your family. So,look beyond just what is in it for you. Make the right choice by opting for the right plan here at Coverfox.com.