6 Common Myths about Term Insurance Plans

Term insurance plan is the purest form of life insurance. It is a profitable plan over other kinds of insurance schemes. But people have some common myths about term insurance plans. They actually do not know what term insurance is all about. Due to misunderstanding or some ignorance, many people avoid term insurance plans to secure or ensure their lives. In this column, we will discuss the 6 common myths about term insurance plans and understand the reality behind them. We will also know the benefits of the term insurance plans.

Term insurance plan without any return is not worth

One very common myth is term insurance just an expense like other utility goods as term insurance does not provide any maturity benefits on the survival of the policyholder till the term period. There are money back policies under term insurance also. If you choose that kind of plan you can get back some amount on the survival of the policyholder. Otherwise, term insurance is itself a profitable deal to make. It charges very little amount of premium. Here is the comparison table between the term plan and traditional money back policies.

Term insurance will benefit in case of death of the policyholder

Generally, normal term insurance policy offers the assured payment in case of death of the policyholder. But there are many term insurance plans that offer some additional coverage like accidental death, permanent or partial disability, illness etc. Critical illness can be added to the policy at a very nominal price. Let’s discuss the riders available with the term insurance plan.

Accidental death -Suppose you buy a term insurance of Rs. 1 crore along with a rider of the accidental death of Rs. 50 lakh. If you die in an accident, your nominee is eligible to get = Rs. 1 Crore + Rs. 50 Lakh = Rs. 1.5 crore.

Permanent or partial disability-Again, if you meet with an accident and suffer a permanent disability or you become unable to work, you will be eligible to receive the assured sum. You need to avail this rider at the time of buying a term insurance plan with a very nominal amount.

Don’t need as I am single

If you are single or unmarried still you should buy a term insurance plan. Suppose you have taken a home loan or car loan or education loan or any kind of personal loan and an uncertain demise of you takes place. In that case, your family members are liable to pay the whole amount of the debt you have withdrawn. This becomes more adverse if you are the only bread earner in your family. So, if you buy a term insurance plan on certain demise your family will get the assured sum and with the help of this they can repay your debt and fulfill their future expenses.

Another thing is to remember here that now you are single, but in future, you will get married and have children. Then you will need to take a term plan. The number of premium amount increases with the increase of age. So, if you delay and get older you will have to pay the much higher premium.

I am not going to die, I have just started my job or career

Young people have a common perception that they are superhumans. Nothing can do any harm to them. It is because they are full of energy, enthusiasm and can overcome any situation. As most of the term insurance policies have no monetary benefit on survival of the policyholder, so people consider term plan policies worthless. But here most vital question arises what will happen if you die untimely or to say suddenly.

What your family will have to face on your sudden demise? It is a big question. Here comes the role of term insurance plans. Term plans can ensure the future of your family. As you are young you tend to neglect any worry. But you should take into consideration any unfortunate thing that may happen. So, when you get a job or start earning, you should buy a term insurance plan.

Covered with employee’s term cover for free

Many private concerns provide term insurance schemes to their employees. This is called group insurance scheme. If you work in such kind of a private concern, still you need to buy a term insurance plans because,

  • You are insured by the group insurance plan till you work for the concern. Whenever you quit the job, or join other concern you are not covered with any insurance coverage.
  • Again in the group insurance scheme, you cannot set the insured amount, tenure etc. These things depend on the employer. On behalf of you, your employer will decide the amount and pay the premium accordingly.

So, the smart idea is to buy a term insurance plan for self from any insurance providers in India like LIC, HDFC, ICICI Lombard, MaxBupa etc.

Insurers always reject the term insurance claim for same or other reasons

Many people have a misconception that the insurance companies always turn down the claims done by family members on the certain demise of the policyholder. Here you need to analyze the settlement ratio before buying a term insurance plan. You should focus on the reliability and transparency of the insurer. Usually, insurance policies are based on utmost good faith between the company and the policyholder. At the time of filing the application, you should be sincere and read all the provisions, terms and conditions mentioned in the form.

In case the insurance company denies settling the insurance claim, you need not worry. All you need to do is to lodge a complaint before the Insurance Regulatory Department Authority of India (IRDA) which is the apex body or the watchdog of the insurance industry in India. IRDAI ensures smooth reimbursement of the claims that are legitimate. Many beneficiaries have been compensated by the term insurance companies after they lodged a complaint in IRDAI against insurance companies.

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