This Dussehra, let’s conquer the 10 common life insurance myths holding you back from securing your family’s financial future, just like the 10 heads of Ravana. Every myth represents doubts that cloud your judgement. Let’s clear the web of overthinking, embrace clarity, and make the definitive choice to protect your family’s tomorrow.
In the current landscape, life insurance solutions cater to an individual’s entire life journey. They offer comprehensive financial protection, ranging from family income replacement in the event of an early demise to lifelong income solutions for a long retirement. Between these milestones, life insurance addresses diverse life goals—including wealth creation, child education, and guaranteed income plans. It can also help if an accident or illness affects your ability to earn an income.
Therefore, it is important to dispel common misconceptions about life insurance, so its benefits are clearly understood. Some popular myths include:
Myth No. 1: Buying life insurance is a hassle
Thanks to the internet and mobile apps, every aspect of life has been simplified, including buying life insurance products. You no longer need to wait for appointments with your insurer. You can visit the chosen insurer’s website and use online calculators to calculate the premium. Next, answer straightforward questions about your health, profession and personal preferences. Then upload your KYC documents and make a secure online payment to buy a term insurance policy from home.
Myth No. 2: Life insurance is only useful for tax savings
Tax deductions are not the only advantage of life insurance. In your absence, the life insurance payout can also cover your family’s financial needs. The maturity benefits from your insurance policy can serve as a corpus for various upcoming financial goals like child education, legacy planning, etc.
Myth No. 3: The young and healthy don’t need life insurance
Uncertainty is part of everyone’s life. A young person in the pink of health can also meet an unfortunate accident. Early in their careers, young people may not have the chance to build a substantial corpus through savings alone. But term insurance can ensure your family financial future is stable even if you are no longer around. Furthermore, young people pay much lower premiums than older people. As a result, buying term insurance when you are younger can help you to obtain substantial coverage at a lower cost.
Myth No. 4: Life insurance is only useful after the policyholder’s death
Depending on the life insurance plan you choose and its specific features, life insurance can also be useful in other situations beyond providing a financial safety net for your loved ones. Retirement plans can help you enjoy financial independence in your golden years. Savings plans like ULIPs can also be used as asset-building tools; child plans can help to secure your child’s future while guaranteed plans offer a fixed financial return, providing predictable wealth creation.
Myth No. 5: Only the well-off can afford life insurance products
Insurance policies now offer extensive cover at reasonable rates. A simple online search reveals bespoke plans to suit every budget. Choose a plan based on your current needs rather than a fixed or low value to ensure adequate coverage. Insurers also provide the option to increase cover at various life stages like marriage, childbirth, purchase of a house, etc., later in life as and when you need it. Several insurers offer affordable term insurance plans with monthly premiums in the low triple digits, providing coverage of ₹1 crore or more. A term life plan is a good option, as term insurance usually provides a large sum assured at a low premium.
Myth No. 6: Insurance from employers provides sufficient coverage
Employer-provided term cover is available only while you remain in service. If you change jobs or retire, your policy may be terminated. In addition, the life cover offered by a group insurance policy may be insufficient for your family’s future needs. A life cover of at least ten times your annual income is recommended by insurance experts. You should also account for increasing liabilities and inflation. Given this scenario, a private term insurance policy is more beneficial in the long run.
Myth No. 7: Getting insurance payouts is cumbersome and can be denied
Before buying any policy, check an insurer’s claim settlement ratio (CSR) and solvency ratio. Higher ratios indicate the company is more likely to meet its customers’ claims. Accordingly, choose an insurer with a longstanding CSR above 98%2. This shows the company settles at least 98 out of 100 claims, indicating reliability. You can check the insurer’s CSR on the IRDAI website. Moreover, disclose all your medical issues without fail when filling in the proposal form. This will ensure your nominee’s claim is not rejected later.
As for the tax myth, under the Income Tax Act, 2025, death benefits from life insurance policies are not taxable3 if the beneficiary receives no additional interest on the payout.
Myth No. 8: Avoid ULIPs when the market is down
ULIPs offer free fund switching options, and customers can switch between equity and debt funds, depending on the market condition, that too free of cost. This helps customers to protect their investment from market volatility along with a life cover.
Myth No. 9: Purchasing term life insurance online is risky
On the contrary, buying insurance online makes it easy to choose a term plan of your choice. Additionally, buying insurance online means saving you money and reducing your overall insurance costs. Moreover, insurers are leaving no stone unturned to make the customer experience better across all sales channels.
Myth No. 10: I don’t need life insurance because I have savings.
Life insurance is an income replacement tool. Savings may not be enough to cover years of living expenses, outstanding debts, and your family’s long-term needs in case any unfortunate incident happens with you.
The 10 heads of Ravana may represent different reasons to overthink, but when it comes to financial protection, understanding the facts can help you make a more informed decision.
Also Read: NBFCs Account for 47% of New-to-Credit Consumer Originations: FIDC-TransUnion CIBIL Report
In Summation
Let us use this Dussehra as an opportunity to put these myths to rest. Carefully assess your family’s financial needs, then research online or check with your preferred financial advisor to find the life insurance policy that best suits you. Regardless of your age or current savings, the right life insurance policy can protect your family in the event of an untoward incident. Remember the saying: ‘Better safe than sorry.’
Views expressed by: Vikas Gupta, Chief Product Officer, ICICI Life Insurance Limited.
