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The COVID-19 outbreak, that has infected at least four lakh Indians and killed over 13,000 , has brought to light the need to be prepared for uncertainties of life and the need to ensure that one has a backup plan to get their life goals done. With the number of infections rising sharply every day and no vaccination yet, a life insurance policy has become crucial to secure the financial needs of your family in the event of any unfortunate event.
Despite the widespread reach of efficient term life insurance policies, a large portion of the country's population still remains unaware of the benefits these plans have to offer.
According to the most recent data available with IRDAI in Mar-2020, India's life insurance penetration as a ratio of premium to GDP was 2.74 percent, when compared to a world average of 3.31 percent . This goes to show that many people in India still do not consider having a life insurance cover an important necessity.
Further, within the categories of life insurance policies, 'term insurance plans' are one of the most underrated financial products in the market.
Choosing the Right Plan
Gone are the days when term insurance plans used to be limited to only death benefit! Apart from making sure that your loved ones get the maximum financial security in unpredictable times, there are companies that offer customizable term insurance plans, widening the scope of their cover.
Consumers in India now have wider range of term insurance plans available that offer a mix of newly added features, and specific riders, making it a practical choice for a financial cover against uncertainties.
To help you make the right decision by better understanding term insurance benefits, we've debunked the top five-term insurance plan myths. Let's have a look!
1. Term insurance policy will benefit only when I die
One of the most common myths among individuals who hesitate to buy a term insurance plan is that you will lose the premium amount spent, if you survive till the plan matures.
However, times have changed and you can pick a term plan that has benefits beyond the basic death benefit.
Pure Term Insurance plan like Bajaj Allianz Life Smart Protect Goal by Bajaj Allianz Life offers "return of premium*" benefit, which means the total premium you pay till the time of maturity will be returned to you, in case no claim has been made.
Furthermore, this smartly designed policy is customizable to extend the scope of your policy by including options like lifelong cover where you only need to pay a premium for a limited period. You can opt for these benefits while selecting the product variant as per terms and conditions specified therein. There's also an option to include add-on covers such as accidental death benefit, accidental total permanent disability benefit, critical illness covers and waiver of premium benefit. You can expand your term insurance cover by choosing add-on covers as per your need and requirement.
While an insurance policy's primary objective is to cover your family from financial constraints in event of unfortunate death, a -return of premium term plan will help you add to your retirement corpus, among other things.
**Product feature/benefit mentioned above are dependent on variant
2. Money spent on premium could be better used to make investments
While it is practical to separate your investment and insurance instruments, amassing wealth takes a very long time. Over time, you may have added debt responsibilities like a home loan or education loan, and it will be a heavy burden to repay for your family if you leave without an insurance cover to fall back on.
Hence, until you reach the breakeven point of asset accumulation, some sort of insurance cover is definitely required. Even if you do have assets built, most of it may not be liquid. Your family will have to sell the house or car to pay off any medical expenses that may have been incurred, not leaving much for important needs like your child's education.
3. "I am single, I do not need life insurance"
This is another one of those myths that needs to be corrected! Even if you're single and young, it's a good idea to buy term insurance. You may have pre-existing debt obligations like an education loan or an auto loan to pay for, which could leave your parents or guardians with unexpected financial burden of having to liquidate whatever little assets you may have accumulated or pay from their own pocket.
A term insurance will provide a sufficient financial cover that will be of great help to your loved ones and shows financial preparedness on your part, leaving them a little less emotionally strained from the unexpected loss of your life.
4. Buying term insurance plan is a tedious process
Many people believe that buying a term insurance plan is a long, complicated process which will eat up a lot of their time. When in reality, it's super simple and can be purchased online within a few minutes! It is as easy as online shopping. You can go to the website of the insurer of your choice, read the policy features, buy what you need, and pay online.
Insurance companies have websites with live chat bots for instant help, in addition to 24x7 customer support. You will be able to fill the application form online, submit KYC documents and buy a policy in minutes.
Accessing policy account statements, paying premiums, etc. is also a cakewalk and can be easily found online on a company's website.
5. Term insurance plan is for tax purposes only
Premiums paid towards insurance policies do have tax benefits under section 80C of the Income Tax Act 1961 but it should not be the primary reason for you to purchase one.
Instead, look at term insurance as a basic necessity to protect your family from unexpected financial constraints and focus on finding a plan that provides a sum assured large enough to meet your debt obligations (business or personal), child's education, spouse's needs, day-to-day needs of the family, any hospitalization expenses due to critical illness or disability and more.
Moreover, to get a large sum assured in case of a term insurance plan, you don't even need to pay a big premium. Which makes it a win-win situation.
An insurance policy plays a big role to protect your family from financial uncertainties during unforeseen times and a term insurance policy ensures you get a sizable coverage for your family's financial needs. What's great is that you no longer need to limit yourself to old fashioned term insurance policies. Private players like Bajaj Allianz Life provide highly customizable plans that helps you to achieve your goals, without having to worry about leaving your family with a financial burden.