Top myths about Term Insurance you shouldn't believe

Term insurance is a simple and effective tool for financial planning and safeguarding your loved ones against life’s uncertainties. By paying a premium to the insurance company for a predecided term, you get coverage (sum-assured), which will be paid to your beneficiaries in case of an unfortunate event (death or permanent disability).

There are flexible payment options, a simple onboarding process, and enough coverage for your family or business to stay afloat for a significant period. However, there are a few myths due to which the term insurance coverage is still low across India.

Let us talk about some of the most common myths and try to bust them one by one:

Myth#1: Term insurance is too expensive and an unnecessary expense in the hands of the policyholder

After all, the policyholder does not survive to enjoy the benefits of term insurance. This is an incorrect assumption as term insurance is not too expensive but is one of the most cost-effective financial planning tools. Premiums are significantly lower than whole-life policies because they cover a specific period and don’t accrue cash value. Tax benefits also enhance its value by reducing your tax liability.

Myth#2: Young people do not need term insurance

This is perhaps the biggest myth around. When you are young, the entire process (costwise and procedural) of buying a term insurance policy is quite swift. You end up paying lower premiums and almost negligible medical checkup requirements.

In addition, securing term insurance early provides critical financial security for any dependents or debts in unforeseen circumstances, ensuring that young adults can safeguard their future and that of their loved ones.

Myth#3: Term insurance only pays if you die

This is another misconception that makes people ignore term insurance. People often wonder why they should be paying a premium (in the form of expense) for which they will not receive any benefit. However, there are various kinds of coverages, such as critical illness and disability benefits, which you can avail of from your term insurance policy in your lifetime.

These additions enhance the utility of term insurance, ensuring it supports the insured not only after death but also during major health crises, thereby offering a broader safety net.

Myth#4: My BMI is too high, or I am too unhealthy to qualify

If you are healthy, the onboarding process shall be faster and swifter. You will not be asked for any medical reports, and the premiums will be moderate. However, having a high BMI or having any existing ailments does not automatically disqualify you from having term insurance.

Many insurers offer plans specifically designed for those with health issues. Additionally, the insurance market has expanded to include various products that cater to a diverse range of health profiles, ensuring that most individuals can find some form of term life coverage.

Myth#5: My employer has already enrolled me in a group term insurance

Being part of a group term insurance is an excellent perk the employer offers. However, the terms of such policy are designed according to the employer, and the coverage might not be enough for your family’s lifestyle requirements and obligations. It is important to have a term insurance policy designed per your unique financial needs and covers you even when you are unemployed.

Myth#6: Term insurance jeopardises portfolio returns

The inclusion of term insurance as part of your investment portfolio is an excellent decision that benefits you in the long term. When you save a significant amount to protect your family’s future (compared to a conventional endowment plan), there is an opportunity to reinvest the amount in other high-yielding investments.

Further, you receive tax exemptions on premium payments, and your dependents also receive a tax-free sum assured in case of an unfortunate event.

Myth#7: The process is too complicated

On the contrary, the process is quite straightforward. You can choose either online or offline modes to select any insurance provider. The KYC process has become quicker, more effective, and more reliable than ever. With online platforms, you can get a term insurance policy within a few minutes.

Additionally, the criteria for underwriting have evolved, with many companies now offering policies with simplified or no medical exams, reducing the complexity and making it easier than ever to get covered.

Summing up

In case you believed any of the above myths, we hope that we were able to bust them. Myths are just that–myths. Buying a term insurance policy is critical for your overall financial planning and management process. Term insurance is an affordable, accessible, and flexible option that provides essential protection. Before dismissing it based on misconceptions, consider how term insurance can be tailored to meet your specific financial and life circumstances.

FAQs

Is term insurance only beneficial if I die?

No, term insurance can also provide critical illness and disability benefits, offering support during major health crises.

Can I qualify for term insurance if I have health issues?

Yes, policies are designed for those with health conditions, ensuring most individuals can obtain coverage.

Does employer-provided term insurance offer sufficient coverage?

Employer-provided term insurance might not meet all your financial needs, making it essential to have an individual policy for comprehensive coverage.

Is the term insurance application process complicated?

No, the application process for term insurance has been greatly simplified with online platforms, making it quick and user-friendly.