*This is a sponsored feature by Life Insurance Corporation of India (LIC)
Life insurance is one of the most important elements of a long-term financial plan, and also among the most neglected. This is partly because it’s a defined benefit product that deals with the value of human life - it’s safe to say life insurance is somewhat more complicated than a fixed deposit or savings account.
Life insurance doesn’t receive nearly as much attention as it should. That’s why it’s easy to fall prey to misconceptions surrounding the product.
LIC India, the nation’s largest insurer, has been helping Indians protect their families and plan for the future for more than 60 years. LIC is unique in its focus on rural areas, making it a truly nationwide insurance company.
LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business, in spite of the growth of private sector players.
With each success, LIC strives to further educate consumers about different insurance products. Read on to learn more about the facts and fiction surrounding life insurance.
I’m still young, I don’t need to think about life insurance yet
When you’re young and at the peak of your physical fitness, life insurance may not seem like an urgent decision. However, buying a policy when you’re young makes sense.
Younger people are generally considered a lower risk for life insurers. This means you’re more likely to get an affordable policy with lower premiums.
The sooner you start, the better, as being locked in early on will help you when your family grows and your financial responsibilities increase. Your parents too may become dependent on you as they age. If you buy a policy before you have children or your parents become older, you will get protection at affordable rates.
My employer-sponsored life insurance is enough
The insurance your employer provides is a benefit that, at first glance, seems quite helpful. However, it may not be enough to cover your current and future liabilities. Employer-sponsored policies often come as fixed benefits that don’t allow you to add riders or other benefits.
If you move on from your job or retire, your coverage will end and you won’t be able to transfer it as you were never the owner of the policy in the first place. By that point, it may be hard to secure a policy because of your age and health.
Settling a life insurance claim is very difficult
Insurance companies exist to protect their customers, and their reputations are built on that. They make public their claims settlement ratios for consumers, as well.
If you provide accurate personal information and keep your policy up to date, you should feel confident your claim will be accepted.
For a smooth claims process, make sure you provide accurate medical details, disclose any other policies you hold and renew the policy regularly.
There’s no use paying for a product that gives me no returns
A term policy is the most basic form of life insurance. You pay premiums for the duration of the policy - the term. The number one return from a life insurance policy is peace of mind: you can’t put a price on the assurance you get from knowing your dependents will be financially secure if you’re not around.
However, endowments, annuities, whole life, money-back and ULIPs are just a few of the plans that combine protection and investment. In addition to protecting your loved ones, you get the added benefit of a periodic payout or lump sum when your policy matures.
These policies are especially ideal if you don’t have children or any dependents. Your circumstances may change at some point, but if they don’t, you’re still locking away some money for future goals, such as retirement.
A sum assured that covers my existing income and expenses is enough
As your income grows, your family may get used to a certain lifestyle. In your unfortunate absence, they’ll need enough money to cover the loss of your regular salary, responsibilities such as EMI payments and your child’s education or any outstanding debt.
Due to inflation, your expenses are bound to increase. Financial planners recommend a sum assured that’s about 10 to 12 times your annual income.