Is factually incorrect information preventing you from taking life insurance? Today, a multitude of life insurance companies offer several attractive and useful plans that serve a wide range of purposes. However, many people hold on to tired notions about insurance, ranging from ‘I have enough money, I don’t need insurance’ to ‘Insurance eats into one’s budget’. This line of thought can stop you from taking a good life policy, which can come in handy in times of financial emergencies.

Five popular myths about life insurance

No dependants = No need for insurance

It is actually quite impossible for anyone in the world to exist alone without a single relative or dependent. And even if one is alone and orphaned, one may grow up and find a partner at a later date. On the other hand, one may not get married and hence have no dependents, but one may have private debts to pay off. If not for dependents, a person can use life insurance in India to pay off liabilities.

You don’t need separate insurance, if your company provides it

Most Indian companies today provide life insurance policies to their employees, but a closer study of the plan shows that it is a basic one with a low sum assured. A low sum assured will hardly cover even the costs of hospitalization, let alone support the employee’s loved ones. Instead of discovering the plans inadequacies when faced with a financial emergency, it is wiser to bank on one’s own life policy and use the company-sponsored insurance as a back-up.

Life insurance is a good tool for tax benefits

Most people still view insurance through the prism of tax savings. Not only is this thinking fallacious, it can also lull you into believing that all life insurance policies in India provide an equivalent amount of tax deduction. The Government specifies an upper limit on tax deduction, and the same is also mentioned in one’s salary slip. So, before you purchase an expensive life insurance policy hoping for a large tax deduction, it is worthwhile to examine the tax limits.

Only those with an income can take life insurance

Though insurers insist on a source of income for applicants, there are provisions in place to include non-employed persons in the ambit of life insurance. Non-employed family members can be nominated as beneficiaries in the main plan; thus, they benefit from the sum assured when the policy holder passes away. Also, many life plans extend help for medical treatment of nominated family members.

Life insurance is for those without enough savings

Not all of us inherit a lot of wealth from our parents, or are born into such riches that we never need to save a rupee of our own. Most of us must create our own wealth and make our own savings and investments. Till such time that you have reached a certain age and stature in your employment that your income takes care of not just your expenses but also creates wealth for you, you need life insurance in India to help you tide over sudden financial crises.

Posted by The Indian Economist