Myths and facts about life insurance plans: Know them before you buy your next policy

Updated: May 30, 2020 12:24 PM

Before you ignore to buy a life insurance plan because of myths, it better to check the facts.

Myths and facts, life insurance plan, compare the policies, best plan, tax saving, money back plan,With the online options available, it is easier to compare policies and find the best plan as per one’s need.

By Rakesh Goyal

Life insurance is one of the finest and secure ways to protect you and your family against various life uncertainties such as mishaps, accidents, unforeseen situations, loss of income due to any ailment or disability, death of a breadwinner, or even to meet short-term and long-term financial goals. This financial instrument is designed such that it provides you with a list of benefits so that you and your dependents can meet financial goals and overcome financial crisis smartly.

Despite all the perks that life insurance offers, there are a number of misconceptions, myths pertaining to the life insurance policy. One must educate themselves about the truth and avoid any false information. Knowing the facts can help you to make a wise decision and extract the utmost benefits from a life insurance plan.

This article is intended to put a full stop on some of the common myths of the life insurance plans that are circulated around. Get informed when you read more about these myths and facts.

Myth: Life Insurance is beneficial only after the death of the insured

Fact: The most common myth linked with a life insurance plan is that it would only offer benefits after the death of the insured, which is not completely true. Ideally, life insurance is meant to provide financial aid in case of life assured’s eventuality. But there are various types of life insurance policies available to meet the different needs of the investor. Life insurance is broadly classified into pure life insurance and life insurance with investment opportunities to meet other financial goals. A term plan is a pure life insurance plan, whereas ULIPs, child, retirement, moneyback plan, offer more than death risk cover.

Myth: Life insurance plan is meant for tax saving

Fact: Usually, most policyholders invest in life insurance plan considering it only as a tax saving option. On the contradictory, the primary objective of life insurance policy is to offer a financial safety net to the insured and his/her family whereas the tax-saving is an additional benefit that comes along as cherry-on-the-cake.

Myth: A group life insurance cover is enough

Fact: The lack of awareness about the term for which the policy would cover you is one of the main reasons for such myths. The fact is although an employee is covered under the group life insurance provided by the employer, the coverage is valid under the policy only until he or she is employed with the company. Once the person leaves the company, he or she is no more covered under the same.

Hence, it is highly recommended to opt for a life insurance plan separately to avoid any unpleasant surprises once you leave your current organization. Also, even if a person is in the same company or switches to another company, which would also provide group life insurance plan, the insured must ensure that the coverage offered by the group policy is sufficient enough to cover or offer financial support in case of unforeseen situation.

Myth: Other investments are better than life insurance

Fact: Comparing life insurance policy with other investment options is definitely not a right decision as both the options function in a completely distinct manner. The reason behind going with a life insurance plan is that it keeps your family financially equipped in your absence which might not be the case in other investment options. Moreover, this plan also eliminates the risks involved in other investment option.

Myth: People with existing illnesses are not eligible to buy life insurance plan

Fact: There are insurance companies who provide cover for people who are suffering from medical illness, however, considering the medical history or extension of the coverage for the patient, the company might charge higher premiums than other. Also, it is very critical for the policy seeker to share correct and irrelevant information during the applying process itself in order to avoid any unpleasant surprises during the claim process. As sharing incorrect/false information or incomplete data of medical history are some of the common reasons for rejection of claims under such situations.

Myth: Comparison is not needed while buying life insurance

Fact: There a many life insurance companies in India and each offer various life insurance products. The plethora of available life insurance products can be overwhelming to shortlist such huge list before buying. Ideally, it is advisable to take help from a financial planner, consult an insurance advisor or simply compare various plans online. Comparing online is a good option as it helps you to compare different plans easily without any hassle and you can make an informed decision about the best suitable plan available to meet your needs.

Bottom line

Remember – Sabse Pehle Life Insurance. And, before you ignore to buy a life insurance plan because of myths, it better to check the facts. With the online options available, it has now become easier to compare the policies and find the best plan as per one’s need. So, instead of relying on any myths, it is better to go online or consult the agent and do the reality check before considering these myths to make an informed decision. Proper research and informed decision can help your boat from sinking during any other unfortunate situations. Never forget that “Life insurance plan is not just a commodity but is a true necessity”.

(The author is Director, Probus Insurance, Insurtech Broking Company)

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