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Common Misconceptions About Term Insurance in India

A term insurance plan is one of the simplest and most effective ways to secure your family’s financial future. Despite its affordability and comprehensive coverage, many individuals hesitate to invest in term insurance due to prevalent myths and misconceptions. These misunderstandings often lead to poor financial planning, leaving families vulnerable to unforeseen challenges. In this guide, we will debunk some of the most common term insurance myths in India, helping you make informed decisions about your financial security.
Myth 1: Term Insurance is Expensive
Many believe that term insurance plans are costly and unaffordable, especially for young individuals or those with limited income.
Reality: Term insurance is one of the most affordable forms of life insurance. It offers high coverage at low premiums because it focuses solely on providing life cover without investment or savings components.
For example, a 30-year-old non-smoker can secure a ₹1 crore term insurance plan for as little as ₹800-₹1,000 per month. Starting early further reduces premiums and ensures longer coverage.
Myth 2: You Don’t Need Term Insurance if You’re Healthy
Some people think that being young and healthy eliminates the need for term insurance.
Reality: While good health lowers the immediate risk, life is unpredictable. Accidents or unexpected health issues can occur at any time. Term insurance provides a financial safety net for your family, ensuring they are not burdened with expenses or liabilities in your absence.
Moreover, buying a term plan early when you are healthy helps lock in lower premiums, making it a cost-effective choice.
Myth 3: Term Insurance is Only for Breadwinners
A common misconception is that only earning members of the family need a term insurance plan.
Reality: While breadwinners should prioritise term insurance, homemakers and non-earning members also need coverage. Homemakers contribute significantly to the family’s functioning, and their absence could lead to increased expenses for childcare, household help, or other services. A term insurance plan ensures that these costs are covered.
Myth 4: Term Insurance Does Not Offer Returns
Many avoid term insurance because it does not provide any maturity benefits if the policyholder survives the term.
Reality: It is true that traditional term plans do not offer returns, but they are not designed for savings or investment purposes. Their primary goal is to provide financial protection at minimal cost.
For those seeking returns, insurers now offer variations like Return of Premium (ROP) plans, which refund premiums paid if the policyholder survives the term. These plans come with higher premiums but address the concern of receiving a payout upon survival.
Myth 5: Claim Settlement is Complicated
There is a perception that claiming the sum assured is a lengthy and complex process, often leading to rejections.
Reality: Reputable insurers in India have streamlined their claim processes, ensuring quick and hassle-free settlements. The claim settlement ratio (CSR) of an insurer reflects their reliability.
For example, insurers with a CSR above 95% are known for efficiently processing claims, ensuring families receive the promised benefits without delays.
To avoid complications, ensure accurate disclosure of information during the application process and keep all policy documents organised and accessible.
Myth 6: Term Insurance is Not Necessary if You Have Savings
Some individuals believe that their savings and investments are sufficient to secure their family’s future.
Reality: While savings and investments are important, they may not be enough to cover all expenses, especially in the event of unexpected demise. A term insurance plan provides a lump sum payout, ensuring that your family can meet their financial needs, including daily expenses, debts, and long-term goals.
Savings can complement term insurance but should not replace it as the primary safety net.
Myth 7: Smokers and Drinkers Cannot Get Term Insurance
There is a belief that smokers, drinkers, or individuals with pre-existing health conditions are not eligible for term insurance.
Reality: Smokers and drinkers can purchase term insurance, but they may have to pay higher premiums due to increased health risks. Similarly, individuals with pre-existing conditions may still be eligible after undergoing medical tests, though their premiums could also be higher.
It is essential to disclose all health-related information honestly during the application process to avoid claim rejections later.
Myth 8: Term Insurance Covers Only Death
Many people assume that term insurance only provides financial protection in the event of the policyholder’s death.
Reality: While the primary purpose of a term insurance plan is to provide a death benefit, adding riders can enhance the coverage.
Popular riders include:
● Critical Illness Rider: Covers major illnesses like cancer or heart disease.
● Accidental Death Benefit Rider: Provides an additional payout in case of accidental death.
● Waiver of Premium Rider: Waives future premiums in case of disability or critical illness.
These riders ensure that term insurance addresses a wide range of risks, offering comprehensive protection.
Myth 9: It’s Better to Wait Until Later in Life to Buy Term Insurance
Some believe that term insurance is only necessary later in life when financial responsibilities are greater.
Reality: Waiting to buy term insurance increases premiums as age is a key factor in determining costs. Additionally, health issues that develop over time may lead to higher premiums or disqualification.
Buying a term insurance plan early locks in lower premiums and ensures coverage for a longer duration.
Myth 10: All Term Plans are the Same
A common misconception is that all term insurance plans are identical, so there’s no need to compare them.
Reality: Term plans vary across insurers in terms of features, premium costs, claim settlement processes, and add-on riders. Comparing plans helps you find the best term insurance in India that suits your financial needs and goals.
Use online tools like premium calculators and comparison websites to evaluate options before making a decision.
Conclusion
A term insurance plan is a powerful financial tool that ensures your family’s security in uncertain times. However, misconceptions about term insurance often prevent individuals from making informed decisions.
By understanding the reality behind common term insurance myths, you can choose a policy that aligns with your financial goals and provides comprehensive protection for your loved ones. Invest in term insurance today to secure a brighter and worry-free future for your family.

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