Term Insurance plan is a prudent and economical way to secure yourself and your family financially. It is suggested to plan your finances early in life if you have availed of big-ticket loans like home loans. Term insurance plans are an affordable way to protect your family against financial exigencies. It provides high coverage with low premiums.
However, individuals shy away from investing in term insurance plans owing to the myths associated with them. Read on to understand the myths and facts about term plans.
Understanding the Myths and Facts About Term Plans
Some of the most common myths associated with term plans are:
Term Plan Is Not a Wise Investment As It Provides Only Death Benefits
Term insurance plans are not considered a wise investment as they do not provide lump-sum maturity payouts like other life insurance plans. The mindset is to build a retirement corpus while protecting your family financially with insurance plans.
Term insurance plans prioritize financial protection over lump-sum maturity payouts, ensuring your family’s stability in case of your untimely demise. It’s an essential investment, not a waste of money, as it shields your loved ones from financial hardship. You can access higher coverage options at reasonable premiums, customized to your specific needs using an insurer’s term insurance calculator. By inputting your age, gender, health, dependents, income, and liabilities, you receive a personalized plan designed to secure your family’s financial well-being.
You Do Not Need a Term Plan If You Are Not Married
Not needing a term plan if you are single is a total misconception, especially if you have incurred liabilities to build assets. Imagine the plight of your family if anything untoward happens and they have to bear the burden of the liabilities.
Consider the situation where your parents depend on you for financial support. While the coverage can be lower than that of married individuals, there is still a need for term insurance in such situations.
Term Plans Are Not Economical
It is misunderstood that term insurance plans are more expensive than other life insurance products.
On the contrary, term plans offer substantial coverage at budget-friendly premiums. For traditional policies like endowment policy, ULIP, money-back, etc., the premiums are set at a yearly premium of 10% of the sum assured. For the same premium, you can get higher coverage with term plans.
Settlement of Term Insurance Claims Is Tedious
Another prevalent misconception about term insurance policies is that the claims procedure is both time-consuming and tedious.
In reality, many insurance companies have streamlined the claims process to make it simple and efficient. By providing the required documentation, you can expect your claim to be processed within a few days. Furthermore, the IRDA has made it mandatory for insurance companies to settle claims within 30 days after receiving all essential documents from the policyholder.
You Do Not Need a Term Plan If You Are Covered Under Your Company’s Group Insurance
Do not be under the impression that if you are covered under your company’s group insurance, you need not invest in another insurance plan.
The fact is, the coverage you get under group insurance may not be adequate to provide the required financial security for your family in your absence. You should also consider the fact that your next company may not provide insurance benefits when you switch jobs.
Consider your family’s future financial commitments and present liabilities before you decide not to invest in another term plan when you are covered under the group insurance of your company.
Insurance coverage is not necessary for young and healthy individuals
Life is unpredictable, and accidents can tragically affect even young and healthy individuals. In the early stages of your career, it is challenging to amass significant savings. However, life insurance assures that your family will not suffer from financial constraints.
Furthermore, young individuals enjoy the advantage of lower premium costs compared to what they would incur as they age. The ideal time to purchase life insurance is when you start earning, allowing you to secure substantial coverage at a more affordable rate.
You Cannot Customise Term Insurance Plans
There is a common misconception that all term plans are one-dimensional, solely providing a payout to the policyholder’s family upon their demise without any customization options.
In reality, in today’s highly competitive landscape, term insurance plans have evolved to offer customization. Various insurance companies now allow you to tailor your term plan to suit your unique needs. You can include additional riders like accidental death coverage, accidental disability coverage, critical illness coverage, premium waiver and more to enhance your term plan’s benefits.
Furthermore, if you are not inclined toward a pure-term plan, there are alternatives such as the return of premium plans, increasing or decreasing term life insurance, and convertible term life insurance, providing you with a wide array of choices contrary to conventional belief.
Term insurance goes beyond the misconceptions attached to it. It is a dynamic and customizable option to provide financial security to your family. Modern insurance plans are made flexible through various riders and plan options. As life is full of uncertainties, it is essential to explore these options to secure a comprehensive term insurance plan that provides the best protection for your loved ones.