5 Myths on Buying Term Insurance – Busted!

If you are the sole breadwinner of the family, it is time to secure your life and the financial future of your loved ones by investing in life insurance. The primary reason to buy a life insurance plan is that your family can receive death benefits in the case of your untimely absence. The sum assured that your family will get should be sufficient enough for them to meet their day-to-day expenses and accomplish their long-term financial goals.

So, it is advisable to buy term insurance plans, as they provide high sum assured at economical premiums. It is one of the reasons why term plans are one of the most sought-after life insurance products in the market today. However, there are many misunderstandings related to term insurance that you should know about before buying it.

Myth 1: Start investing in term plans early in your to facilitate savings

Usually, the term insurance age limit to invest in a plan is from 18 to 65. However, it is recommended to buy a policy at a younger age, as you will get it at a cheaper premium. Insurance providers consider young people as low-risk policyholders, as the  possibility of death is quite low among this category. As the premiums remain stagnant throughout the tenure of your term plan, you can save a generous amount in the long run. Here, the word ‘savings’ refer to the amount saved on the premiums.

The objective of buying a term plan is to leave behind a significant sum for your family. If you do not have any dependents or not planning to get married soon, you need not haste the decision of buying a term plan. Moreover, a pure term policy does not provide any maturity benefits unless you have invested in a Term Insurance with a Return of Premium (TROP).

Myth 2: The sum assured can only be 20 times your yearly income

The basic thumb rule of buying any life insurance policy is that the sum assured should be 20 times your annual earnings. It is because the amount that your family members will receive after an unfortunate event should help them to meet the household expenses, any existing liabilities, and future goals like children’s education and their wedding. Additionally, consider the inflation aspect and opt for a sum assured accordingly.

Myth 3: Every rider is beneficial

Well, not all riders can prove helpful. Though riders widen the scope of your term plan, they are expensive. For instance, the cost of a critical illness rider is almost similar to the term insurance premium but there are several limitations. This rider has various terms and conditions that you should know before buying it. So, read the documents carefully and decide whether a particular rider is useful for you or not.

Myth 4: Your family will receive the sum assured before anyone

If you have outstanding loans, the sum assured from term insurance plans will be used for paying these debts during your absence. However, if you are a married man and want to make sure that your wife receives the sum assured in case of an untoward incident, you can sign the Married Women’s Property Act addendum while buying the policy. 

Myth 5: Get a lower premium by hiding your health conditions

It is not a wise thing to do, as you are risking your family’s monetary well-being just to save some money. The insurer can reject your nominees’ claim if they find out that demise is due to any pre-existing health condition, which you did not inform about while purchasing online term insurance. Therefore, make it a point to share the necessary details about your medical history and conditions honestly.

Now that you have an idea about the misconceptions associated with buying term insurance plans, be smart and make the correct move at the right time. The premiums of online term insurance policies are lower than the traditional approach of investing in these plans. So, do your research well, before purchasing a term plan.