The Most Common Term Insurance Myths Explained

 

Term Insurance

Amit, who was 28 years old, met his friend Sumit, 35, who was married and had two children, by chance while on a work trip. Amit was constantly busy because his job required extensive traveling. That was one of the rare occasions when Amit got an opportunity after the conference to sit down and chat with his friend over coffee.

As they sat together and talked, the conversation soon drifted to personal finances, when Amit mentioned that he had bought a term insurance plan at the very young age of 25. This startled Sumit, who had assumed Amit was too young to purchase insurance. It led to an interesting course of conversation.

Sumit: I don't know much about term insurance, but I have heard of it. And how did you come to buy a term plan at the young age of 25? Isn’t that too soon to purchase life insurance at such a young age?

Amit: Well, the sooner, the better when it comes to life insurance. The earlier you purchase a term plan, the less premium you will have to pay. The most appealing aspect of term insurance is that it provides you with a significantly larger amount of coverage for a premium that is far less than that of other policy types.

So, as soon as I had begun my professional career, I created a financial plan and realized that it made sense to invest in a term plan. In any case, my obligations will only grow in the future. Because of this, I believe that having a term plan would help me protect my assets. It will enable my family to maintain their quality of life without having to forgo significant milestones in the event that I pass away too soon. Thus, it is never too early to purchase term insurance.

Sumit: I see. Will it be a wise idea for me to purchase a term plan now, at my age? Is it worth buying a term plan now?

Amit: It will be a wise decision to purchase a term plan even at your age to protect your family in case of any uncertainty that may happen in the future because unfortunate events don’t knock on your door to let you be prepared for it in advance. You need to plan and prepare for it in advance so that your loved ones stay protected and financially stable even in your absence. In short, a term plan is a good idea to protect your family’s financial future, no matter what age you choose to buy it.

Sumit: Ok, I got it. But as far as I understand the terms of a term plan correctly, it does not give any benefit if the insured survives the policy term. Will the entire sum of money not be wasted?

Amit: No. Not at all. You can avail of various options now along with the term insurance, such as the Return of Premium Option. It is just like an added advantage to your term plan, which offers a return of premiums paid on your successful survival against the uncertainties of life.

Sumit: Okay. Can you guide me on how I should go about buying term insurance for myself and how much coverage I should apply to protect my family in order to secure their future financial stability in case of any unfortunate event? Isn’t obtaining term insurance a cumbersome process?

Amit: No, not at all. In fact, purchasing a term plan is not at all complicated. It is simple to apply for a term plan with the help of a financial advisor. An advisor can help you choose the sum assured depending on your requirements and future financial goals. Then you can check the quotes for insurance premiums based on the coverage you want. Make sure you give your insurer authentic and complete information. A claim may be rejected if you give false or erroneous information regarding your financial situation or health.

Additionally, the cost of premiums for term insurance plans is relatively lower than other savings and investment plans.

Sumit: Okay, I see now! But I have another query! Is money from life insurance taxable?

Amit: No, it isn’t! The premiums paid and the death benefit proceeds received by a beneficiary of a term insurance plan are not subject to income tax.

Sumit: Great. I am really thankful to you for educating me on term insurance and its advantages. I'll undoubtedly purchase a policy shortly to secure my family.

Amit: Sure, you don’t have to wait, though. It is very easy to buy term insurance now. You can compare the plans of various insurance companies by going to a nearby branch and meeting their representatives or financial advisors. They guide you through the entire plan and procedure to get your application through for insurance.

A term insurance policy goes a long way toward protecting your family's financial future. Term insurance is easy to obtain and a crucial element of any financial strategy. Contact your financial advisor or nearby insurance company as soon as possible after filtering out the good ones with better quotes.

 

Term Insurance is easy to understand and affordable. It offers a large sum assured at a relatively low premium.

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