Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to reimburse the sum equivalent to Sum Assured on the event of occurrence of insured individual’s death or other event, such as terminal illness, critical illness or maturity of the policy
. So it compensate the loss of income to its dependents due to sudden death of policy holder during policy tenure. If the insured survives the term then, depending on the type of the policy, he or she may receive the full or a part of the face amount of the policy. We will discuss some of the biggest myths floating around today when it comes to planning your life insurance, so you can avoid trouble when you come face to face with them in the future.
#1- I will save my tax —-In India still today maximum policies bought to save tax. We kept our insurance need a side. Earlier we used to save tax Rs 14000 by investing Rs 70000 in Insurance policy. One has no other option. Now we have so many investment instruments to save tax U/S 80 C of Income tax Act. What will happen if our honorable Finance minister makes provision in his next budget that no deduction U/S 80 C of Income Tax Act would be applicable for Life Insurance premium paid? Would you stop paying your further Life Insurance Premiums or would you stop buying Compare Best Life Insurance Policy? Therefore, our priority should be having adequate life insurance Coverage rather than savings Income tax.
#2- Agent has been referred by my closed friend or relative — some time people buys life insurance policies in obligation without knowing his actual needs as the agent was sent to him by his closed friend or relatives. Remember your friends or relative are your well-wisher. That is why he sent agent to add value in your current Guide to Financial Planning situation. However, we take it as an obligation and buy policies accordingly. Even they didn’t bother to understand about the policy they bought.
#3- Agent gives me some discount and gifts — remember section 41 of insurance act 1938 prohibits rebating either whole or part on the commission by Life insurance agents. However, if there is an involvement of this while buying and selling of insurance policies, the focus remains on high commission paying policies or famous policies rather than need-based policies. Therefore, you need to avoid all these while buying life insurance policies.
#4- I would take policy on my children and wife- Buying Life Insurance Planning policy in the name of kids or wife are emotional decisions. Look if head of the family or rather only bread earner in the family does not have adequate life insurance coverage and if the bread earner is no more, how his spouse will continue the policy of her and on her kids?
First, she has to think about her daily living expenses. Paying insurance premium will be second option. If she won’t be able to pay further premium, is that will be worth in having that policy?
Therefore, the bread owner should be having sufficient life insurance coverage and then he should think about buying life insurance policies on his wife and his kids. Even child policy should have the provision of covering parents either as proposer or as a rider.
#5- I have long life I did not required life insurance— life is full of uncertainty. We do not know what is going to happen when. Just to safeguard the financial impact on ones dependent in case of sudden demise of bread earner of the family we required adequate life insurance.
Even life insurance laws says that one must have a life insurance policy whenever he dies.
Life insurance business runs on the principal of uncertainty. Having sufficient life insurance provides peace of mind, which in result may give long live.
#6- I am too young to buy life insurance – Premium of life insurance policies primarily depends on age (subject to underwriting decision also). So buying policy at earlier stage, you will get secured from beginning and will pay lower premium. Starting early might give you provision of less medical test also depending on sum assured you opt for.
#7- I will ask my accountant or Chartered Accountant whether to buy policy or not – One thing you should keep in mind that your Chartered Accountant may be well trained in managing your accounts and giving advice on saving tax , but he might not be expert on deciding how much insurance coverage you may required. You are the best judge about yourself or else take the help of expert and buy policy accordingly.
Avoiding to buy policy merely because your Chartered Accountant Or Accountant told you as there is no provision for payment in your file would not be a good idea.
The choice you have now is to hire an experienced Financial Planning Workshop who can help you rather guide you to have adequate life insurance coverage and ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event.