- Date : 05/12/2016
- Read: 5 mins
A lot is said about life insurance, but how much is true and how much is not?
The biggest myth about life insurance is that you don’t need it, but it’s not the only one. Here are some common life insurance myths that you must not believe in and the underlying truth supported by hard facts and numbers.
There is no doubt that life expectancy in India has been rising consistently. Over a ten-year period from 2002 to 2012, life expectancy for men in India rose by 4.6 years, while studies showed that women lived three years longer.
Yet, other complications are rising as well. Diabetes has become the 7th most common reason for death in India in 2016 as compared to 11th rank in 2005. Death due to diabetes has increased by 50% during this period. Now, the average Indian youngster leading a sedentary lifestyle is facing higher risk of suffering from such lifestyle conditions, which can easily cause death at an early age.
So, don’t presume you don’t need life insurance just because we are living longer. Your family deserves the financial security and protection offered by a low-cost term insurance plan.
Conventionally, term plans don’t offer any benefit other than death benefit. However, this does not mean you must choose between a term or an endowment plan only. You can also opt for a Term Plan with Return of Premium that repays the premium that you have paid over the years. So, if you opt for a Rs. 10,000 per year term plan providing protection till the age of 61 years when you are 25 years old, then you can recover the premium paid—Rs. 10,000 x 26 years—if you survive the plan’s maturity.
Further, you have the option to combine insurance and mutual fund investments and opt for ULIPs as well. You can buy as many different plans as you want to, to secure your finances and your life. Additionally, there’s Whole Life insurance which covers you for your entire remaining life, or till you are 100 years of age, whichever is earlier.
Ideally the key objective of your Life Insurance policy should be financial protection of your family in case something happens to you. So, it’s important that you have adequate Life cover before you look at other forms of Insurance which offer investment options as well.
Related: Term Vs Whole Life Insurance
Studies indicate that those living in urban areas marry 2-3 years later as compared to those living in rural areas. Most men and women prefer to focus on their education and career before they decide to make the plunge.
But, do you plan on remaining single all your life? If you plan on getting married, then there is no reason you should not secure your life with life insurance today, especially because life insurance premium keeps increasing with age. You must also think about your parents. You are their biggest investment and you ought to make sure they don’t suffer financially in case you are no longer around due to unfortunate circumstances.
Premium for a term plan worth 1 crore for a 35-year old non-smoking man costs around Rs. 12,000 to Rs. 14,000 per year. The same plan for a 25-year old will cost Rs. 7,000 to Rs. 9,000 per year. Investing this saving of Rs. 5,000 at 8% for 40 years will help you build a corpus of around Rs.14 lakhs when you turn 61 years.
This is the cost of your decision to delay buying a life insurance plan by 11 years—Rs.14 lakhs i.e. you lose Rs. 345 per day for each day that you delay. So, apart from standard benefits like financial security and peace of mind, buying term insurance early can help you save more than Rs.10 lakhs without doing anything out of the ordinary.
It is far more obvious to assume that a working woman needs life insurance, than a non-working-woman needs life insurance. This is because the tasks she performs as a stay-at-home wife or mother are rarely seen in terms of financial contribution. But let’s look at the various services that a home maker provides:
- Childcare: changing diapers, feeding, putting down for naps, bathing, comforting
- Picking and dropping from school/college
- Cleaning of the entire house
- Laundry for the whole house
- Cooking 3 times a day
- Running errands and buying groceries
- Paying the bills, making budgets, monitoring insurance policies
If a monetary value were attached to these tasks, it would be upward of Rs. 3.5 lakhs per annum, including salaries of a cook, driver, household help, personal shopper, financial planner, etc. This is more than enough reason to buy life insurance so that the family doesn’t suffer a major financial setback in case of an unfortunate event.
A life insurance policy is your way of doing that extra bit to ensure that your family and you must not let yourself get misled by myths. Keep the above numbers in mind and securing your family’s future will be an easy task.