Myths And Facts About Life Insurance

Life Insurance is considered as an important vehicle for financial planning, however decisions to invest the right amount in life insurance policies depends a lot on the perception and myths surrounding it. So, we've taken a look at the most common myths about life insurance, helping you to make the right financial plan for you and your family.

Myth 1:I am already Insured. I don't need any more insurance.You may have taken life insurance policies earlier but the question of having a sufficient cover is important. Although there are several methods to arrive at the right cover, the thumb rule is 10 or 20 times of your annual income or calculating “Human Life Value”. “Human Life Value” scientifically calculates the insurance cover. You can also consult your financial advisor to arrive at the right insurance cover for yourself.

Myth 2:I don't need life insurance because of coverage given by my employerOne should review if there is sufficient coverage offered by the employer. Also whenever you leave the company for any reason including retirement, the coverage normally stops.

Myth 3:Life insurance policies are not liquid and an individual gets the benefit only on happening of a contingency.Unit Linked Insurance plans offer liquidity as well as life insurance coverage. In ULIPs you have the facility to withdraw or encash amounts after three years from the commencement of the policy. The benefits in the policy continue even after the withdrawals. Also insurance is a good tool for long-term savings.


Myth 4:Life Insurance policies require commitment for premium payment for a longer period.Unit Linked Insurance plans offer a lot of flexibility and different premium paying period options to suit your requirements. You have the option to pay premiums for three years, five years, or entire tenure.


Myth 5:Mutual funds are a better alternative to Unit Linked Insurance Plans.Mutual Funds is pure investments. Through Unit Linked Insurance plans you can earn returns as well as get risk cover. Thus you can not only fulfill your medium and long-term financial goals but also take care of any risk in case of a unforeseen event.


Myth 6:Investing in Life Insurance policies require a lot of discipline as it requires large sum of amounts to be paid every year.For convenience, premiums can be paid by different modes like yearly, half-yearly, quarterly or monthly. In this way your yearly outgo is split into installments spread over the year creating regular savings in the plan.


Myth 7:Payment of Premium for Life Insurance policies is very inconvenient.There are various options available for premium payments. You can pay premiums through Internet or Electronic Clearing Services offered by the bank.


Myth 8:In Unit Linked Insurance plans the, investment pattern is decided by the Fund Manager and the individual has no control over it.Unit Linked Insurance Plans give a choice of Funds with investments in debt and/or equity. You can choose the asset allocation through these fund options depending on your risk appetite.
It's seen that the way life insurance was bought and perceived has undergone a paradigm shift. The essence to invest in life insurance lies in the right amount of risk cover and savings needed to achieve your financial needs.