Why you shouldn’t believe these term insurance myths

January 4, 2023

You will often hear people saying many different things about term insurance. And out of that, some would come off as a myth.

Here’s an example of a 35-year-old married man with two kids who might be willing to learn the truth rather than the false news spread around. We are here to debunk some myths and answer your questions about term insurance and its benefits.

Here, we are taking the instance of Mr A and Mr B to educate you on why you shouldn’t believe these term insurance myths.

When Mr A mentioned to Mr B (the 35-year-old married man) that he had purchased a term insurance plan when he was 25, the conversation quickly shifted to personal finances as they sat together and chatted. Mr B was astonished, as he had assumed Mr A was too young to purchase insurance.

Mr B: Although I don’t know much about it, I have heard of term insurance. And how did you end up purchasing a term plan at 25? Isn’t it too early to buy life insurance at that time?

Mr A: Well, getting life insurance sooner is indeed preferable. The earlier you get a term plan, the more affordable the premium will be. The best part about term insurance is that it gives you excellent coverage for a much cheaper premium than other types of policies.

I, therefore, prepared a financial plan as soon as I started my professional career and discovered that putting money into a term plan made sense. Anyhow, going forward, my obligations will only grow. Having a term plan will help me protect my assets because of this. It will assist my family in maintaining their quality of life if I pass away too soon without having to give up on the significant milestones. Consequently, it’s never too early enough to purchase term life insurance. Also, remember to choose the best plan to get the best term insurance tax benefit.

Mr B: I see. At my age, is it a good idea to look into getting a term plan today?

Mr A: For sure. You can purchase a term plan that fits your needs. As I previously mentioned, as you age, your financial obligations increase. So regardless of your age, purchasing a term plan is a brilliant idea to safeguard your family’s economic future.

Mr B: Alright. But if I understand the terms of a term plan correctly, there is no benefit if the covered person lives past the policy period. Will all the money be wasted?

Mr A: No. Nowadays, your term insurance plan can also include a return of premium option. Term insurance plans that offer a return of premiums paid upon successful protection against life’s uncertainties are known as “Term Plans with Return of Premium” (TROP).

Mr B: Okay. So what should I do to purchase term insurance? Isn’t applying for term insurance a complicated process?

Mr A: In no way at all. Purchasing a term plan online is the quickest and most savvy way to buy life insurance. The procedure is carried out quickly and efficiently. Depending on your needs and long-term financial objectives, choose your sum assured. Once you’ve finished, you may calculate your insurance premium online, get quotations, and pay. Make sure the insurer gets accurate and comprehensive information from you. Giving false or inaccurate information about your health or income may cause the rejection of your claim. Also, purchasing online can result in lower premium costs! So you can opt to buy term insurance online.

Mr B: Got it. Good! I have another query, though! Money from life insurance – is it taxable?

Mr A: No, it isn’t. A beneficiary of a term insurance plan is not taxed on their premiums or the untimely death benefit proceeds they receive.

Read more about the term insurance tax benefits from a trusted source, to understand better and make the best choice.

Note: The Finance Ministry of India announced a new tax regime for taxpayers in the Union Budget 2020. Taxpayers can opt for the newly proposed tax regime or choose to stick with the existing tax regime.

Mr B: Great. I appreciate you educating me on the advantages of term insurance. Without a doubt, I’ll avail term life insurance soon.

Mr A: Yes, you can skip the waiting part. These days, you may also purchase insurance on your smartphone. Every process can be done with just a click. And make sure you read all the term insurance benefits before putting in the time and money.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.