In urban India, only three out of ten people buy term plans. Such low figures are mostly due to misconceptions about this pure-protection plan.
However, term plans are crucial to shield your loved ones against any shortage of funds in case of an unfortunate event. New-age term plans provide many other benefits too. Read on for explanations on some common myths around term insurance and make an informed decision.
Myth 1: Term plans are not useful because these do not provide maturity benefit
Reality:
If your loved ones depend on you financially, term insurance is vital for you. Since term plans involve no investment component, they provide extensive coverage at pocket-friendly premiums. The payouts can help your family to:
- repay loan EMIs
- fund children’s education
- cover their living expenses
- fulfil long-term liabilities such as children’s wedding
Further, return-of-premium term plans (TROP) refund the entire premium paid after the policy period expires. Also, some insurers allow converting a term plan to another policy type before maturity and get maturity benefits.
Myth 2: Term plans are useful only after the policyholder’s death
Reality:
Apart from buying a TROP, you can also add riders at a minimal price. Such add-ons provide the following benefits:
- Upfront payouts on the diagnosis of critical illnesses covered under the plan, safeguarding your savings against the rising medical costs.
- Payouts on permanent disability due to an accident, helping you tide over income losses due to disability.
Thus, term plans cover you against various unfortunate circumstances.
Another significant advantage is the tax deduction up to ₹ 1.5 lakhs available on the term insurance premiums under Section 80C of the Income Tax Act 1961,
Myth 2: Term insurance is not for single individuals
Reality:
You may have educational loans, car loans, credit card dues, or home mortgages. Also, your earnings might be your family’s principal source of income. A term plan will help your family avoid any financial burden and meet their expenses in case of an unforeseen event.
Moreover, some term plans allow you to increase your coverage in future. Thus, you can start with a low sum assured and increase the amount when your liabilities grow.
Myth 3: A young and healthy individual does not need a term plan
Reality:
Like all life insurance plans, the sooner you buy a term plan, the lesser it costs. Hence, by buying at a young age, you can secure sizable coverage at an affordable price.
Moreover, life is unpredictable. India accounted for almost 11% of accident-related deaths worldwide in 2019. Hence, regardless of age, a term plan is essential to secure your loved ones against financial challenges.
Myth 4: ₹ 1 crore term plan is enough
Reality:
Inflation can eat away this amount purchasing power over time. Your life cover should be adequate to meet your family’s expenses. You need to consider the following factors before buying:
- Your family’s current living cost
- Future liabilities
- Unpaid debts
- Inflation
Myth 5: Buying term insurance is a hassle
New-age term plans are available online, allowing hassle-free, paperless purchases. Kotak e-Term plan is an online policy you can buy just by visiting the website. You can estimate the payable premium as per your chosen sum assured, fill the application form online, and pay digitally.
Conclusion
Term plans are cost effective financial tools that help you secure your family’s well being in your absence. Do not let baseless fallacies dissuade you from buying the coverage your loved ones need.
