Term Life Insurance: Fact vs Fiction

life insurance myths busted

The decision to buy term insurance is often met with hesitation, confusion, and most often, denial. Currently, India has a significantly low penetration of life insurance.

As of 2020, the insurance penetration in India is merely 3.7% of the GDP as against the world average of 6.31%. One of the major reasons for low penetration in India is several insurance-related myths. Even though these myths are nothing more than conjecture, people, even those that are educated, tend to believe them or at least use them as an excuse to not buy insurance.


If you tend to believe these general fictions concerning insurance, you need to re-check your facts here:


Fiction: I don't need insurance if I have investments 

Maybe you have one, or two, or perhaps even more holiday homes or real estate investments. But real estate cannot be sold off at the drop of a hat. In unfortunate, unforeseen circumstances, the investor cannot be sure of getting the payout that he/she may need or have expected to get.


Even with investments of the more liquid sort, like mutual funds and stocks, the market conditions might not be suitable (for selling) at the moment that the family finds itself in a moment of distress. Hence, it is best to place a dedicated financial resource such as a term life insurance policy that will substitute the breadwinner’s income upon their demise. 


Fiction: I have health insurance, and that's all we need

It is natural in our 'positive thinking' times to refuse to address the idea of anyone in the family, much less the breadwinner, meeting with an untimely death. 

However, preparedness is also part of positive action.

Health insurance provides cover against hospitalization only, not against contingencies like death and disability. In these uncertain times, you should be looking for something like the Aviva Life Shield Premium plan, which not only provides the sum assured but also an additional payout to the nominee in case of accidental death or a waiver of future premiums in case of a permanent total disability due to an accident. 


Fiction: Only the most significant financial contributor needs to hold a policy 

If a family has multiple earners, one must have an income replacement strategy in place for an unfortunate incident.

Let us illustrate with an example:  

Two men are tasked with carrying twenty gold blocks from a particular bank into its armoured vehicle once a month. Mr A is stronger and can move 12 blocks, while Mr B can move eight blocks. One month, Mr B does not turn up, and Mr A finds himself unable to move all 20 blocks. However small, he depended on Mr B's contribution to carry the burden. 


The 20 blocks of gold that need to be moved in this anecdote are equivalent to a given family's monthly financial expenses or financial burden. Every contributing member's monthly contribution makes a difference. 


Let us also not forget that life's uncertainty means that an accidental death could take away both the earning family members. While a family is dealing with the loss of a loved one, impending financial issues can make the loss even more daunting. The beneficiaries will need a replacement for the lost income to maintain the lifestyle that they currently hold. 


Fiction: Beneficiaries never get/ struggle to get their sum assured 

This might have been the case in the days where paper ruled the roost and manual documentation took much longer but technology has made the claims process much easier and hassle-free today. Of course, you must practice due diligence and check the insurance company's claims ratio that you intend to partner with. For example, Aviva Life Insurance has a 97.53% claim settlement ratio.


Fiction: Only old people need to get insurance 

Insurance is best taken when you are young so that you have a nice, long cover. As a result, you will enjoy smaller, lighter premium amounts. As you get older, your premium increases simply because you are older. Buying a life insurance cover when you’re young enables you to have a longer life cover with a lower premium. 


Fiction: Term plans are a waste of money 

Most people consider term insurance as a waste of money since it does not offer a maturity value. But just because term plans do not have a maturity component, this does not make them a useless investment. On the contrary, think about what would happen if your family were to face a contingency after you are gone?

This is where the importance of a term plan comes into play. With the security that term insurance provides, you can be assured that your family will not go through a financially difficult time when you are not there. 


Fiction: Smokers are not eligible for term plans

Smokers and non-smokers, both, are eligible to buy a term life insurance plan of their choice. However, smokers usually tend to pay a higher premium compared to non-smoker but that no way means that smokers should not buy a term insurance plan, even if it is at a high premium. Life is uncertain for smokers as well as non-smokers, and no one wants their families to suffer financially in their absence. Plans like Aviva Life Shield Premium are available to both non-smokers and smokers.



Term life insurance policies are pure protection plans that offer your family the financial security to navigate the tough times. So, it is advisable to be informed about the real facts and separate them from the fiction or misconceptions that can otherwise cloud your judgment. Get a term plan like Aviva Life Shield Premium today so that you are prepared for anything that can come next!



AN Nov 50/20

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