Navratri Special: 9 life insurance myths debunked and tips to secure your financial future
Navratri, a celebration of victory over darkness, is the perfect time to dispel misconceptions about life insurance and make informed financial choices. While life insurance is a crucial pillar of personal finance, many myths can cloud our understanding and decision-making.
Let’s debunk nine common life insurance myths and offer some valuable personal finance tips to secure your financial future this festive season.
Myth 1: Life Insurance Is Only For The Wealthy
Contrary to popular belief, life insurance is not just for the wealthy. It’s a necessity for individuals across income levels. Affordable term plans, savings plans, and ULIPs are available for everyone, ensuring financial protection for loved ones, irrespective of one’s income.
Tip: Start early to reap the benefits of lower premium prices and lock in long-term interest rates.
Myth 2: Life Insurance Is Not Necessary For Everyone In The Family
Life insurance is important for everyone, including stay-at-home parents, homemakers, and non-working family members. While the particular family member might not be earning, taking a policy in that person’s name would help the person achieve the life goals. Also, in case of their sudden absence, while the emotional impact cannot be compensated, the family’s financial goals would remain unaffected.
Tip: Include all members in financial planning and ensure adequate coverage for them. This way, you not only protect your family’s financial future but also honour the love and care they bring to your lives.
Myth 3: Employer-Provided Insurance Is Enough
Employer-provided life insurance is a good perk but often provides limited coverage. It may not be enough to cover long-term financial goals like paying off a mortgage or funding children’s education in case of the person’s absence. Also, when you are between jobs, you will be left without coverage.
Tip: Supplement employer-provided insurance with a personal policy that aligns with your financial goals. This ensures your family is not left uninsured in case of job loss or career change.
Myth 4: Only Salaried Individuals Can Get Life Insurance
Self-employed individuals can also secure the well-being of their business and family with life insurance. While the absence of salary slips made it difficult traditionally, advancements in technology, such as the Account Aggregator framework, allow insurers to evaluate self-employed individuals based on more accessible financial data.
Tip: As a self-employed individual, life insurance is vital to protect both your business and personal finances. Ensure adequate coverage for liabilities and future expenses. Use tech innovations to simplify the process and make insurance a key part of your financial independence plan.
Myth 5: It’s Too Late To Buy Life Insurance
It’s never too late to secure life insurance. While premiums may be higher as you age, there are still policies designed for older individuals to ensure their families remain financially protected.
Tip: Don’t just think of life insurance; also focus on retirement planning with par and non-par products.
Myth 6: Life Insurance Isn’t Needed If You’re Single
Single individuals can benefit from life insurance too. Various forms of life insurance, like term plans, guaranteed returns plans, and ULIPs, can help build a corpus to cover debts, medical expenses, or any dependents you might have in the future. If you plan to start a family, purchasing a policy while you’re young guarantees a lower premium.
Tip: Evaluate your needs from time to time and build on the coverage. Today, a simple term plan may be sufficient, but you may need to build a corpus for life events such as marriage or child’s education. Life insurance can prove to be an essential tool for long term wealth.
Myth 7: Life Insurance Is Too Expensive
Many people overestimate life insurance costs. Not everybody needs a large sum assured, and not everybody needs the optional benefits that come with the insurance. Both term and savings plans can be designed to be within your reach by choosing the right plan. And of course, if you start young, you would end up saving a lot of money. Additionally, premiums for women are usually lower than for men of the same age.
Tip: Choose from various payment options—monthly, quarterly, or annually—to fit your budget.
Myth 8: Insurance Payouts Are Taxable
In most countries, including India, life insurance payouts are tax-exempt, making it a smart way to protect your family’s future.
Tip: Utilize Sections 80C and 10(10D) of the Income Tax Act for tax benefits on premiums and payouts, reducing your taxable income and boosting your savings.
Myth 9: I Don’t Need Life Insurance If I’m Healthy
Good health today doesn’t guarantee the same tomorrow. Getting a life insurance policy while you’re healthy allows you to lock in lower premiums for life.
Tip: Diversify your personal finance portfolio. While health insurance covers medical emergencies, life insurance secures long-term financial goals. Combining both ensures holistic financial protection.
Smart Financial Wisdom
As we celebrate the triumph of good over evil, it’s time to challenge misconceptions and make wise financial decisions. Life insurance is a powerful tool to protect your family’s future. Take charge of your own money and start by ensuring your family’s financial stability with life insurance.
(By Srinidhi Shama Rao, Chief Strategy Officer (CSO), Bandhan Life Insurance)