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Myths about term insurance plans

When it comes to term insurance plans, the myths surrounding this plan works and people do not prefer to buy this plan. Myth is a perception regarding something which does not hold true in reality. Let us bust the myths surrounding term insurance plans to give you a clearer and broader perspective on why term plans are pure insurance plans and have to be bought by one and all.

MYTHS

I am in my early 20s, it is too early to buy a term plan

Like they say “The early bird catches the worm”, be it investments or insurance, taking a plan early reaps great benefits. When you are young and have no dependents, you become a risk taker and want to make investments wherein you can have great returns. But with young age, you can buy a term plan at cheap rates for a higher sum assured. Term plans come at a nominal rate wherein coverage of Rs.1 crore can be provided for a premium for Rs.20,000/- to Rs.22,000/-. However, if you have not yet bought a term plan and are in your late 30s or early 40s, you can still insure yourself with a term plan as the premium does not rise so steeply and is affordable.

I am already covered under group life insurance

Your employer would have covered you in a group life insurance policy, but with job loss on a high, getting a pink slip from the company is quite a possibility. The time gap between you find a new job will keep you uninsured and the new company might or might not cover you under group insurance.
I will get no money back if I survive the entire period of term plan

Though you will not get any return if you survive the tenure of term plan, but the main purpose of buying a term plan is to secure your family from the uncertainty of the future. Insuring for a sum assured for Rs.50 lacs at an affordable premium of Rs.1000/- per month costs you less than a family dinner at a restaurant. You can buy a term plan wherein the entire premium is used as a mortality charge towards your age and invest the money in investments like FD, bonds or equities to earn higher returns. 

I will have to take maximum term of the policy

It is not a compulsion to take maximum term. You can take a policy till your retirement when mostly commitments like children’s education, home loan repayment etc. commitments are repaid and you have an appropriate amount of money invested in PFs, equities, etc.

Buying a term plan online might not be safe

Buying a policy online is safe, secure and easy to go. You have to simply put in details like your age and the desired policy cover; the premium calculator tool will immediately calculate the premium. 24/7 customer care is available to assist you in all your needs and help you in buying a term plan.

I should insure for only twice my annual income

Typically, insuring yourself for a sum assured equal to twice your annual income is insufficient in these times. You have to make a provision keeping in mind the future expenses and the inflation rate. If you are in your 20s, the sum assured should be 20 times your annual income and if you are in 40s, it should be 10 times or 15 times your annual income.

The claim rejection ratio is too high for term plans

A common myth is that the claims in term plan are rejected by insurance companies. All insurance companies are being monitored by IRDA. The IRDA ensures that insurance companies have an adequate claim settlement. A claim settlement ratio of over 85% is considered to be good for an insurance company. You should buy term plan of the company keeping the solvency ratio (ideally 1.5 times) and clam settlement ratio into account. However, if the claim is rejected on unreasonable grounds, you can file a complaint with the IRDA and get the money compensated.

After reading this article, the myths regarding term insurance plan are busted. Now, you can be sure of what a term plan is all about and know why it is a must to buy and to protect your family’s financial needs for unforeseen situations.

Read more:

How Can I Select the Best Term Insurance Plan?

How to select the best Term Insurance quotes


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