The life insurance industry in India is booming. Total revenues from this sector grew by 29% in September 2016 from the previous month, and was reported at Rs. 5,305.6 crore. On the year-to-date basis, the premiums grew 21% to about Rs. 24,734.2 crore.
Despite this strong growth, there are several questions that remain answered and have given birth to many misconceptions and myths. Here we have tried to bust some of the most common myths.
Im single so I dont need insurance
Most people think that if they are single, they dont have any dependents. And, therefore, theres no need for any financial cover. However, during the course of life you may have taken debts like education loan, medical loan, personal loan (for a car maybe) and/or home loan.
In case of your sudden demise, all the burden of dealing with these debts will fall on the shoulders of your parents.
A certain amount of coverage will be enough
Its a myth that the amount of life insurance should be double your salary or 75% of your expenses before retirement. While this does highlight the fact that the amount of coverage should be decided based on the lifestyle your family enjoyed before the unfortunate incident, the cover may vary based on other factors.
If a person has a home or car loan to pay off in addition to medical bills, then the amount of money needed will obviously be more. Moreover, inflation is an important factor to consider.
My coverage at work is enough
[su_pullquote align=”right”]Your dependents would require more financial support than what your Employer Provident Fund covers.[/su_pullquote]
In case of a single person, the amount of money saved through the Employer Provident Fund might be enough for old age, but in case you have kids, a spouse and other dependents, they will require more financial support than one person alone and you will need to consider additional coverage accordingly. Also, different policies have different benefits, and you need to ensure that the one you choose satisfies your specific needs.
Life insurance is very expensive
No, it is not. Having said that, it is better to start as early as possible, which ensures higher returns in the future. If you start at the age of 25 years, with as low as Rs.3,000 monthly premium payments and gradually increase the amount as your income increases, then you have a good chance of ending up with a corpus in crores.
In case you started little late, then you might need to invest more aggressively to get the desired returns.
Term insurance is a better option
No doubt that a term plan is a great product, but it has a specific use. It provides you cover for a fixed term and in case you outlive it, you dont get any returns. So, for those who wish to ensure the term does not expire, life insurance works better.
It is better to invest in other sectors
[su_pullquote]Unless you have so much assets that you needn’t work anymore, you do need life insurance.[/su_pullquote]
Unless you have accumulated assets to an extent that you dont need to work anymore, you do need life insurance. The problem with assets like gold, property and stocks is that prices keep fluctuating. You can never be sure of the value in say 20 years time.
On the other hand, a life cover entitles your family to a certain amount of benefit even if there are fluctuations in the market. Leaving your family solely with assets may not be the best idea.
You are too young to think about insurance
If youre old enough to earn, youre old enough for life insurance. In fact, this policy makes better sense when youre young, since this is a way to get higher returns. Another advantage is that when youre young, you do not have too many added responsibilities or requirements. This gives you an opportunity to save more and invest in the policy.
The longer you wait, the more expensive the process will get. Procrastination never helps. Just ensure its not too late before you decide to get a policy.
I should choose a foreign company for better services
[su_pullquote align=”right”]The bottom line is that your policy should be tailor-made to meet your needs.[/su_pullquote]
The bottom line is that your policy should be tailor-made to meet your needs. To make this happen, its best to contact a leading life insurance company. A great idea is to opt for a company that is a collaboration between a renowned Indian company and an international leader in the insurance sectors. The Indian leader would bring ensure localization, or that the plans are suited to typical needs, cultures and lifestyles in our country. The international financial services partner would bring in experience and standard procedures for providing services.
When choosing the company, ensure that it has an online presence. This will make getting information, buying the policy and paying the premiums extremely easy. Also ensure that they provide a range of products and solutions. You can check customer feedback to determine whether their services are top-notch.
This article was sponsored by Birla Sun Life Insurance.