Term Insurance Myths Busted: What You Should You Know?

Term insurance is one of the simplest forms of life insurance. However, it is one of the most misunderstood life insurance products. Despite it being one of the purest life insurance forms, it is not yet a very popular choice among the majority. The principal reason behind this is certain myths and misunderstandings around this plan and the benefits or disadvantages associated with it. 

Popular misconceptions about term insurance 

Myth 1: Term plans solely offer death benefits, making it a poor investment choice 

One of the most highlighted misconceptions about term plans is that since it does not offer any maturity benefit like other financial instruments, it is a poor investment option.  

Fact:  
But, the truth is, though term plans do not offer any maturity benefit, they can never be considered a waste of money. Excluding maturity benefits, they offer several other advantages.  
 
An untimely death in the family might be not only an emotional thud, but it can even jeopardise the financial situation, too. Term plans are here to save you from such rainy days. Your family can easily avoid financial crunches using the term insurance death benefit, provided your coverage limit is sufficient to sustain all your financial responsibilities and obligations.  
 
Also, there is one Term plan variant: Term plan with Return of Premium or TROP. In this variant, if you outlive the entire policy tenure, the premiums paid during the entire policy tenure are refunded as a maturity benefit.

Myth 2: If single, you do not need a term plan: 

It is a common misconception that term plans are made for family persons, and single people do not require them.  
 
Fact
But, the truth is, a term plan maturity comes in handy to repay your loans and debts even if you are single. Your extended family members must never be forced to repay your loans and debts due to your untimely demise. Moreover, if you are the sole breadwinner in the family, you need to prepare a backup for securing their existing lifestyle without compromise.  
 
Also, if you plan to get married at a future date, this plan could come in handy to protect your family from any unprecedented events, like your untimely death. So, term insurance is considered as a Plan B for your financial planning. 

Myth 3: Term plans are expensive: 

We tend to believe that term plans are costly without digging up the truth. However, the truth is different.  
 
Fact
Term plans exclusively offer high coverage at reasonable premium rates. This is actually one of the most affordable options to avail high coverage at a low cost. 

Myth 4: The coverage must be exclusively for your current income 

You can opt for term insurance coverage for your current income alone. However, it is prudent to take futuristic coverage. 
 
Fact
So, if you opt for coverage that either increases with time; or choose to increase your coverage from time to time if the premium is a concern; or you can opt for higher coverage at a lower age since the premiums are locked for life; you would stand to gain. 
 
Your selection must be crucially sufficient enough to replace your current income for your family to ensure financial protection without any compromise.  
 
Pro Tip:  
Ideally, if your current annual income is INR 7 lakhs, then your term plan value must be ideally 10-15 times more than that. However, if it is below the INR 7 lakhs threshold, the ideal term coverage must be 20 times your yearly income.  

Myth 5: If you have Group cover, you do not need another plan: 

Most organisations offer group insurance plans as a perk for their employees, but there are certain typical limitations to them: 

  • The group coverage might prove to be insufficient for your entire family.  
  • Group term cover remains in force as long as you are associated with the concerned employer and organisation. It will automatically cease to exist as soon as you change your job.  
  • Group term covers usually follow the terms and conditions of the concerned employer. But as an employee, your circumstances might be grossly different and this cover may become almost irrelevant.  

Fact
Ideally you should take a separate term insurance plan which can be continued for as long as you want, without having to worry about its continuity.  

Considering all these aspects, it is best to maintain a personal term life insurance protection cover to ensure financial security for your beloved family members.  
  

Wrapping it up 

Author Bio

Paybima Team

Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

Choose from India’s top insurers

Latest Post

When you're planning to take a personal loan, knowing your monthly EMI in advance can help you stay financially prepared. The Muthoot Personal Loan EMI Calculator is a simple and efficient tool that provides instant EMI estimates based on your loan amount, interest rate, and tenure.

See nowSee now

See nowSee now

Relocating your two-wheeler to a different state needs to follow many procedures. Depending on the duration for which you are moving to the new place, it becomes necessary to transfer your vehicle papers if it is for more than a year. Although tedious, the process of relocating vehicles can become easy if you follow certain tips mentioned in this post. Read on!

See nowSee now

In what’s being called a quiet healthcare revolution, India’s young working professionals are reportedly making the most health insurance claims – outpacing even senior citizens. Surprised? So are the insurance providers. Young adults ranging between 25 and 35 years, who are often assumed to be in peak health, are now dominating the charts in health insurance claims by age. 

See nowSee now

If you think lifestyle-related health issues only show up after 40, think again. Youth no longer guarantees immunity. Today’s 25 - 35 age group is increasingly facing medical issues that only plague older adults. The reason? Long working hours at the desk, deliveries on speed dial, and a social life that rarely includes a decent amount of sleep are some of the reasons for the early onset of medical conditions like diabetes, anxiety, and hypertension.   

See nowSee now