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Common Life Insurance Myths Debunked

The TDS for life insurance maturity proceeds have been halved from 2 percent to 1 percent, says an article published in The Economic Times in February 2016. The maturity proceeds from a policy are exempt from taxation under section 10 D of the Income Tax Act. However, the exemption does not apply when annual premium payments exceed 10 percent of the sum assured. Life insurance is a must for everyone’s investment bucket. However, the product has been subjected to various myths that make it less attractive. If you are yet to buy a plan, you can buy life insurance online within minutes and secure your family’s future.

Top 5 Life Insurance Myths

Given below are some myths and the facts behind them.

1. It is for the old – If you are young, single and recently started working, the question about getting yourself insured might offend you. However, the reality is that life is unpredictable for the young and old alike, and can be cut short at any moment. Buying a plan while you are young is actually profitable because the premium tends to be lower. You can also enhance the cover as you become financially stronger and update your nomination when you get married.

2. An employer’s policy is good enough – Any plan provided by your company is only valid as long as you are working for that company. Moreover, it may not provide sufficient cover according to your family’s needs. You must assess your employer’s policy and buy a personal one for proper protection, if needed.

3. Term plans are a waste of money – Term plans are not preferred by many since they only offer death benefits and no survival benefit. However, in reality, it is the most comprehensive plan that offers the highest cover at a low cost. Unlike other policies, it is the only pure product.

4. It is best used as a tax saving instrument – Although premium payments towards any policy is eligible for tax deductions of up to Rs 1.5 lakhs under section 80 C of the Income Tax Act, this is not the basic purpose of life insurance. It aims to insure your life and provide financial security to your family after your demise. Therefore, you must choose the cover amount, term and type of plan according to your insurance needs and not merely to save tax.

5. Buying a policy in your wife’s or kid’s name is a good idea – Although buying a policy in your wife’s or kid’s name will get you a lower premium rate, it defeats the purpose of insurance. Life insurance is meant to insure the breadwinner of the family, so that in case of his death, the family would not have to face financial difficulties.

If you are yet to buy a policy, you can buy life insurance online within minutes. The facility of online premium payment is also available for added convenience.