Myths Alert 5 Not-Really-True Things About Term Insurance!

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  | Published: 10 December 2019 | Last Updated On: 08 February 2021

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Do you know what is the cheapest and the easiest kind of life insurance?

There are high chances you already know the answer- Term Life Insurance.

But, let us not forget our best friend (read foe), named Myths that stop a lot of us from buying it.

Having different opinions on a particular subject is the essence of the human race, and term insurance is not excluded from this. In fact, by the end of this article you may feel that it is the most misunderstood financial tool in the market.

Due to the lack of knowledge amongst the people regarding the overall benefits offered by the term policies, the product has never earned the “most popular” tag in the market.

This article debunks the most common myths related to term plans, which in turn will help you in making a well-informed decision.

Fallacy 1: Term Policy Does Not Go Beyond Death Benefits.

There are many people who believe in this myth. But, the reality is that it is totally based on your insurance plan and the additional covers or riders you have bought. Some of the add-ons can be purchased with the term policy for enjoying additional benefits.

For example, an additional cover for personal accident to protect against risks related to permanent or temporary disability, and critical illness cover offers a lump-sum amount for the income loss due to critical illness.

Fallacy 2: I am 50 Years Old; I am Past the Time for Buying a Term Insurance.

You will easily find term plans, which allow you to purchase a policy until you are 65 years old. Moreover, some insurance companies may even offer policies to people older than that too.

So, don’t worry, 50 is not too old after all. You can purchase a term plan even after that. However, it is not advisable to buy one after turning 50 years old because you will end up paying a high insurance premium. The best thing to do would be purchasing a policy in the early stage of adulthood.

Fallacy 3: I am Not Married! Why Would I Need a Term Plan?

Married or not, term life insurance is a must-have. Whether the policyholder is single or not, having a term policy will help in clearing the debts they may have after their demise. The debts may include auto loans, personal loans, or home loans, and more.

This will bring peace of mind that in case of the sudden death of the insured person, their family will not have to face their debts.

Moreover, if the insured is the only earning member of the family, he or she will require an income source for the sustenance of their family after their death.

Fallacy 4: A Term Policy is Pretty Costly!

The truth is that the least expensive method of purchasing a substantial death cover is term insurance.

It is a pooled risk in which the insurance premium is the cost paid for pooling your own risk with the others through an insurance provider.

It includes the policyholder’s share of claims costs expected, the admin expenses, and more.

Fallacy 5: I Should Have a Coverage for My Current Income!

The fact of the matter is that you must be covered for future income, not the current one. The coverage for your present income would not be enough to sustain your family after one year.

The amount of coverage you need is actually a matter of the income you earn and the liabilities you have. Term policy runs on the estimate of your life’s financial value.

The coverage you select must be sufficient for replacing your present income along with adjustments for inflation. This way, your family will be able to continue the same lifestyle and pay off the outstanding loan (if any).

The Bottom Line!

It is very important to keep in mind, term insurance is for your family, not for you. Therefore, you should look for benefits for your family in a policy not for yourself. There must be an investment goal in your mind as a policy owner. This will help you in opting for the most suitable plan.