Jun 09, 2014,09.00 IST

Dump these myths before buying life insurance

Insurance is a crucial part of financial planning. Buying a life insurance policy ensures that your dependents are financially secure should anything untoward happen to you. Depending on the type of life insurance policy you choose you can also enjoy additional benefits. As a result, it is imperative that you buy the right kind of life insurance.

Many a time, people get swayed away by myths and misconceptions that surround life insurance and end up taking the wrong decision.

We debunk some popular myths so that the next time you buy a life insurance policy you are more informed.

Myth 1

Insurance is nothing but waste of money: Throw this myth out of the window. Without understanding the objective of life insurance, people consider that insurance premiums are a waste of money. However, fact is that with life insurance you provide for the financial security of your family in the event of your death. In case of endowment and money-back policies, you can avail financial benefits during your lifetime too.

Myth 2

Life insurance is just another tax-saving instrument: Don’t believe anyone who tries selling this idea to you. Tax saving is just one of the advantages of a life insurance policy. The ultimate aim of insurance remains financial security. Treating it as a tax-saving instrument can lead you to making the wrong choices and you may end up buying a policy that does not fit your insurance needs.

Myth 3

I am young so I don’t need insurance: This is not at all true. In fact, the younger you are when you buy a life insurance policy, lower are the premium rates. It makes sense to opt for life insurance when you are young because that is the time when you are gainfully employed and hence are able to service the policy. If you take life insurance during old age, the premiums are likely to be high and there is a good chance that ill health may come in the way of your taking the policy.

Myth 4

Life insurance will only benefit my family after my death: While the primary goal of life insurance is to provide financial protection to your family in case anything happens to you, there are other advantages too. It all depends on the type of policy you have chosen. If you opt for an endowment plan, you get a lump sum amount in case you outlive the term period of the policy. In a money back plan, you get a percentage of the sum assured at regular intervals.

This way, insurance can help you build a corpus which you can use for your children’s education or marriage and can also help you lead a comfortable retirement life.

Make an informed decision

Buying life insurance is very important when it comes to securing the future of your family. Now that the common misconceptions are out of the way, we hope that you will approach life insurance with more clarity.

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