Three important life insurance myths debunked
NEW DELHI :
Sometimes the decision to purchase life insurance can make people anxious as they have many doubts on the matter. Here are three myths and questions that most buyers have, to understand life insurance better.
Myth 1: Only breadwinners need life insurance
While it is true that life insurance is necessary for the person who earns the majority of the household income, there is also value and safety in having life insurance that covers the spouse, whether or not they work.
Consider yourself the breadwinner; if the stay-at-home parent happens to pass away, how would you handle all of the auxiliary expenses? There would be a sudden increase in household expenses for cleaning, cooking, child care, and home maintenance. You may need to hire someone to clean and care for the children, which can be costly. This is an insurable risk, and home-makers should purchase life insurance alongside the family breadwinner. There are plans available in the market for people who want to purchase joint life insurance policies that cover their spouses as well.
Myth 2: My employer provides life insurance as a benefit so I am covered
While a policy may cover you, that does not imply that you own it. When you choose employer-provided insurance, your employer owns and controls the policy, not you. If your employer cancels or reduces the benefit, or if you change jobs, you may be left without coverage or with insufficient coverage for your financial future.
Another factor to consider is coverage. Some employers may provide life insurance, and while this is a valuable benefit, it may not provide you with all of the necessary coverage.
Sajja Praveen Chowdary, head-term life insurance, Policybazaar.com, explained, “Typically, your employer’s life insurance coverage is limited to 1-2 times your annual salary. The problem with this is that it does not provide a complete picture of your financial situation. If this amount is insufficient to meet your family’s basic needs in the event that you are unable to work, purchasing a separate policy may provide you and your family with much-needed peace of mind. To replace your income for dependents, you typically need at least 5-8 times your income, with some experts recommending 10-12 times.”
Myth 3: I am young, single and healthy. I don’t need life insurance
It is true that no one plans on dying anytime soon or how it will affect their loved ones, but life insurance is a product that you purchase before you need it. Even if you are single and young, with no dependents, it is possible to have liabilities. What if you have a student education ;oan and something unfortunate happens? The burden of repaying your debts will fall on the guarantor of your loan.
Chowdary said that one might believe that insurance is needless at these stages of life and may choose to forgo it. “While it may be tempting to put off purchasing life insurance until later in life, doing so at a younger age can help you save money in the long run. Because insurers calculate your premiums based on their likelihood of paying out on the policy, buying insurance when you’re younger and in good health can significantly reduce the cost of your policy. The wise choice is to begin your coverage when you are young and healthy,” he said.
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