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Top 5 Myths About Life Insurance That You Should Avoid

Posted By ravikumarnama 1464 days ago on Finance - Having Life Insurance is one of the key step in financial planning. Every one should have Life insurance which will insure your family during any unfortunate situation to the bread-winner of the family. This is such an important financial product, that every one should know some important myths prevailing about Life insurance. Even many smart investors making big mistakes which will affect their financial lives during un-fortunate situation to the insurer. So, what are these myths associated with Life insurance policies and how to overcome these myths.Top 5 Myths About Life Insurance:1. Insurance is For Investment Also:This is one of the biggest myth that most of us having is, taking insurance is for Investment as well as for Insurance. That is the reason, Money back policies and Endowment policies are popular than the Term Policies. This is because, after maturity of your Money-back policy or Endowment policy, you will get all your premiums that you have paid along with bonus. Even Insurance companies or agents also highlighting these points in the policy brochure. This myth would cause huge price during un-foreseen events to the insurer. Your dependents affect with financial crisis because of the absence of the bread-winner of the family.Suggestion: Do not mix your investment needs with Insurance policy. Opt for pure Term policy for Insurance purpose.2. Insurance is an Expensive Product:Yes, Insurance is an Expensive product if you choose an Endowment policies or Money-back policies because of the factor of Agent commission and other miscellaneous charges associating with the policy. When you buy it from a tele-callers or an agent, they will never talk about a product which doesn't fill their pockets. These agents or tele-callers talk about expensive products like  Endowment policies or Money-back policies which are commission friendly for agents which prove to be expensive for end users i.e the customer in this case.Suggestion: Go for term plans which are almost 4 times cheaper than endowment plans. Taking Term policy through online is much 20% cheaper.3. Insurance is Not Required at Early Stage:A lot of people in the late twenties don’t feel the need to buy insurance. You will end up being a loser in the end if you start your insurance late. For example, if a person at the age of 30 years take a Term policy till his retirement age (say 60 years) for 50 lakhs, then the approximate annual premium would be around Rs 8000. If the same person take the same Term policy at the age of 35 till his retirement age, then the premium would be around Rs 10000.Suggestion: Buy life insurance at an early age to enjoy a low premium payable per year and this will help you insure yourself for more years.4. Buying Insurance for Dependents:Many of us used to buy Insurance products for dependents like Wife or Children.  Insurance means in case something happens to policy holder, the dependents would get the sum assured. So if you are buying an insurance policy in your wife’s name and something happens to her, you will get the sum assured and if something happens to you i.e. earning member of the family, your wife won’t get anything for which you have bought insurance.Suggestion:  Don’t confuse yourself; always buy insurance in the name of the main earning member of the family.5. Buying Insurance is Just to Save Tax:When the financial year end nearing i.e. from January on wards, the Insurance Agents start selling Insurance products by highlighting the Tax exemptions that you are going to get. This is the strongest point for the agents to lure the employers particularly highly-paid salaried employees. But you should remember that the main purpose of taking Insurance policy is not just saving taxes, but ensuring your dependents with enough money in case of any mis-happening is occurred to you i.e. the earning member of the family.Suggestion: Buy insurance with an intention to secure financial lives of your dependents, and not only to save income tax.Points to Keep in Mind while You Choose Your Insurance Agent:Because of the mis-selling of Insurance products by the Agents, an ordinary man or Insurers is always the one bearing the brunt of wrong and corrupt practices prevalent in the sales arena of financial products. He is confused with so much of options available through insurance advisers, insurance agents, banks, brokerage houses as well as all sorts of advise from print media as well as visual media – the common man is finding it more and more difficult to select the right life insurance adviser in India on whom he can relay and trust for unbiased advice and services wherein he can be assure of prompt services, and can get transparency of information. Hence, one should check the following points before choosing your Insurance agent:1. Check whether the Agent is Full-timer or Part-timer: Generally Part-time agents would be concentrating the policies which are giving higher commission to them and not on the policies like Term policies. Hence you should select the Agent who is a Full-timer and expert in Insurance domain.2. Check the Product Knowledge of the Insurance Agent: Your adviser/agent should be well-verse with his products. He should be able to distinguish which policy/plan would be suitable for your particular life goal such as Child education or retirement; as well as be knowledgeable enough to appraise you of the tax treatment of those plans and policies. With new rules and regulations coming in every now and then in the insurance sector, your adviser/agent should be in know-how of all such developments.3. Check Whether He is Taking About Term Policy: Any insurance agent/adviser approaching you; either through reference or through any other means, and not talking about Term Plan as the first thing and try to sell you junk insurance policies like money back plans, endowment plans, ULIPs, then either that insurance agent/adviser is incompetent or he is out there to fleece you. Stay away from him.4. Take Technology Help: Now-a-days there are many good websites available in the Market (for example, etc.) which will provide you all the policy details and the Insurance providers available in the Market. You will compare the policies, their premium rates and the features at one platform using these websites. You can also find reviews about the policies you have chosen from these websites.Conclusion:Taking Insurance policy is an important step in designing your financial planning. Do take help from financial advisers and choose right Insurance policy which will suit to you and your family.

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