A gentleman I know has been
thinking of buying insurance for quite some time; however, having other important
matters to handle on priority, this was conveniently put on the back burner.
Now that time of the year has come when most people scramble for investments in
tax saving instruments at the end of the financial year and insurance comes at the
top of the list; this gentleman too wants to buy an insurance policy urgently.
He called and said “I want to buy insurance and pay 10000/-; which plan should
I go for?” “Buy term insurance” I told him since I knew he was awfully under
insured. “No, the money goes down the drain if I outlive the plan and I know
I’m going to live long”, he said. There is no dearth of people like him but I
sincerely hope that some day good sense would prevail. Insurance is an integral
part of a sound financial plan. However, it’s highly misunderstood and often
bought and sold for all the wrong reasons under the Sun. Let’s have a look at
some myths associated with insurance.
Myth 1: Insurance is a tax saving instrument.
Section 80C tax benefit is only
an added advantage and it should not be the main reason for buying insurance.
The primary objective of insurance should be to provide protection to your
family. Do not confuse premiums paid under sec 80C with adequate life cover. If
possible, consult a qualified financial planner who can tell you how
much insurance you need by looking at your profile and understanding your
future aspirations. Your insurance requirement will change according to events
in your family like birth of a child, new liabilities etc. For example if you
have taken a home loan, the policy should definitely cover that.
Myth 2: Term
insurance is a waste as I am just paying premium and not getting anything in
return.
No, it's not. In fact it's one of
the best insurance products ever -- simple, inexpensive and serves `its
purpose. Each insurance product has this at its core and the cost is a part of
the premium you pay. It gives you peace of mind through the years as you know
that you are protected. That's exactly what insurance is supposed to do.
Myth 3: My Company’s group insurance cover is enough.
Your group insurance may be enough at the moment but what if you lose your job or change your job with a gap in between. You will suddenly be left without cover. If you just rely on group insurance and say you leave your job and start a business at age 40+, getting insurance becomes expensive due to age and health conditions. It's always advisable to keep a term insurance/health insurance policy running along with the group plan. You will realize the benefits when you stop working.
Myth 4: My credit card has given me free insurance. Why do I
need more?
It's even riskier than your group insurance. In this case there is a big layer between you and the insurance company. A policy is a legal contract between the insurance company and you and that's how it should remain. Have you heard of anyone who has got insurance money from a credit card company? These should be seen as more of extra offerings for marketing purpose.
Myth 5: I should buy policy in my wife or child’s name.
No. Insurance should always be bought by the person who is supporting
dependents. It should never be the other way around. Ask yourself a basic
question: what will happen if something happens to me; the earning member of
the family? Who will take care of dependents; the non-earning members; like
your wife, kids, parents? The answer is insurance. It's a very simple concept
-- don't complicate it. You should take a policy to insure yourself; not your
dependants.
Myth 6: I don’t need insurance. I’m single without dependents.
Well in that case you really
don't need life insurance but think of medical emergency or
health disorders. It can simply
wipe out all your savings. It will make a lot of sense to take a health policy
and some retirement planning product. If you start early you may retire rich.
Health policy should be bought by every individual as it cushions your savings
against unforeseen emergencies. More on this, later. Till then stay insured;
Stay Blessed!!
