Insurance forms a very important link in financial planning, which provides security and peace of mind amidst uncertainties. But despite this vital link in human life, there are a host of misconceptions that surround insurance, leading to misconceptions and misjudgments. In India, these myths are rather rampant due to a lack of awareness and understanding. Therefore, in this detailed article, let us debunk some of the common myths of insurance and provide clear, factual information to assist your choices.
Myth 1: Only Rich People Buy Insurance
Debunked: Insurance is for Everybody
One of the biggest myths is that insurance is a rich man’s luxury. It couldn’t be further from the truth. Insurance is designed to protect individuals and families from financial loss, regardless of their income level. As a matter of fact, for people with meager financial resources, insurance is even more important since it will help in avoiding huge financial losses in case some eventuality occurs.
Varied policies are available at different prices and, hence, affordable for most pocket sizes—from very cheap term life insurance products to health insurance schemes like PMJAY, the list of options is long and very much usable for the regular Indian household.
Myth 2: Young and Healthy People Needn’t Bother with Insurance
Debunked: Insurance Is All About Preparation for the Unknown
Since most youngsters are healthy, they often view insurance as something to consider later in life. However, what many fail to understand is that insurance is about preparing for the unexpected. An accident, falling ill, or any such mishap can be a part of life at any age. Having insurance means you are financially prepared for any unexpected events.
Moreover, the earlier age of insurance purchase may be more cost-effective. Premiums are lower usually at young, healthy ages, so you’ll be able to lock in that price for as long as the policy remains in effect. Hence, investing in insurance early is a very smart financial decision.
Myth 3: Life Insurance is Only for the Primary Breadwinner
Debunked: Every Earning Member Should Have Life Insurance
The common fallacy is that life insurance needs to be carried only on the bread-earner in the family. Actually, all earning members need to be insured against death. Every earning member’s contribution to the family’s income is very important, and the family will suffer grievously without it.
It is also important that homemakers have life insurance. Though they do not directly contribute to the family income, the services they render have a big monetary value. The life insurance may help pay for these services in case of death of the homemaker.
Myth 4: Health Insurance Covers Only Hospitalization Expenses
Debunked: Health Insurance Offers Comprehensive Coverage
For most people, there is a thought process that health insurance only pays out for hospitalization. There are comprehensive covers available under health insurance policies. Most policies cover pre- and post-hospitalization expenses, outpatient consultation, diagnostic tests, day-care procedures, and even alternative treatments like Ayurveda, Unani, Siddha, and Homeopathy in some specific plans.
Some policies also offer benefits for mental health treatment, maternity benefits, and wellness programs. Therefore, a policy document needs to be read with full attention to cover all the benefits under your health insurance plan.
Myth 5: Claiming Insurance is a Hassle
Debunked : Claims Processes are Streamlined and Customer-Friendly
This creates the perception that making a claim is cumbersome and time-consuming, which deters many from buying insurance. The process of claiming insurance has become much easier with technological advancement and improvement in customer service.
The insurers provide facilities such as online claim submissions, customer care 24×7, and dedicated services for assistance related to claims. A good number of insurance companies also render cashless claim facilities for health insurance wherein the insurance company directly settles the hospital bill, lightening the financial burden on the policyholder’s shoulder.
Myth 6: Sufficient Health Insurance is Provided by the Employer
Debunked: Need for a Personal Health Cover
While it can be a wonderful benefit, depending solely on employer-sponsored health insurance can be a very risky proposition. Most employer-sponsored health insurances have a number of limitations, like low sum insured, coverage restrictions, and a lack of portability. You could easily end up losing the coverage in case you switch your job or get retired.
A personal health insurance policy gives you the assurance of continuous and complete coverage, regardless of your job. You are also free to customize your coverage based on individual health and financial needs.
Myth 7: Insurance is a Waste if No Claim is Made
Debunked: Insurance is a Safety Net, Not an Investment
Many myths surround this type of insurance, with one of the most common being that it’s a waste of money if no claims are made. This perhaps is a misconception because people look at insurance as an investment rather than a security measure. Insurance primarily aims to protect people from monetary loss due to unexpected events. It’s about being prepared, similar to wearing seatbelts or having a fire extinguisher in your house for peace of mind.
Some insurance policies also grant certain benefits even if no claim arises. For instance, health insurance policies give a no-claim bonus where the sum insured increases for every claim-free year. Life insurance policies like endowment plans and money-back policies combine the benefits of insurance coverage and savings. They do provide maturity benefits if no claim arises.
Myth 8: Too Many Exclusions in Insurance Policies
Debunked: Knowing what is written in the policy document will help negate this perception.
There could be insurmountable beliefs that there are too many exclusions in the policies. Insurance policies, though a fact, do have terms and conditions. Understanding the terms will help in making informed decisions.
Exclusions are necessary to keep the premiums affordable and to prevent fraudulent claims. Most of the exclusions would be of a uniform nature and would get explicitly mentioned in the policy document. So, to avoid unwanted surprises at the time of claim, it is imperative to go through the policy document properly and ask for queries and doubts from the insurer or the agent before buying a policy.
Myth 9: Insurance is a One-Time Purchase
Debunked: Regular Review and Updates are Essential
There is a false assumption among many that once you buy an insurance policy, you do not have to worry about it any more. On the other hand, the need for insurance changes over time because of the prevailing life events: marriage, birth of children, or even a change in income or health status may alter the insurance needs significantly. It is, therefore, relevant that your insurance policies are changed and updated from time to time to conform with your needs.
Myth 10: Term Insurance is Only for a Short-Term Period
Debunked: Term Insurance Can Be Long-Term
A number of people hold this misconception that term insurance only serves for a short period of time. The reality is, the term insurance can provide cover for a long time—mostly up to 30 years or more—depending on the terms of policy and insurer.
These policies are designed to offer high coverage at relatively low premiums, making them an excellent choice for long-term financial planning. You can choose a policy term that aligns with your financial goals, such as until your dependents become financially independent or until the mortgage is paid off.
Myth 11: Insurance Agents are Only Interested in Making a Sale
Debunked: Agents Provide Valuable Guidance
The idea at large is that the insurance agent is simply after making sales and, in most cases, may not have the interest of the customer at heart. While it’s true that agents earn commissions from sales, their primary role is to provide valuable guidance and help you select the best insurance plan for your needs.
Good agents are those with experience in a wide range of insurance products and are able to help you understand and decide which policy is right for your condition by explaining in detail the benefits and constraints that come with each policy. They can also guide you through the at times intricate world of insurance, provide tailored advice, and walk you through the sometimes difficult process of making a claim. The best agent makes a big difference in how your insurance experience goes.
Myth 12: Premiums Are Fixed and Cannot Be Changed
Premiums Vary: It’s a myth that premiums are leveled and can’t be tweaked. In the real sense, your premiums can be as variable as changes in your health, age, lifestyle, and type of coverage.
Premiums are either payable as a policyholder age or once a specific illness is contracted. Premiums may also be reduced or discounted through good living habits or with more contracts with the same company. Reassess your policies from time to time so that you can manage your premiums better and keep track of them too.
Myth 13: It is the same coverage
Busted: Not All Coverage is Created Equal
Another common misconception: Most believe that the insurance provided is the same irrespective of who the provider is. In fact, it varies from one insurance company to another in terms of their insurance policy. Each insurer has different definitions, terms, and conditions, and also exclusions.
This would only be possible by comparing different policies that different providers have to offer. A customer should not get swayed by the premium cost and also look at other factors like sum insured, claim settlement ratio, quality of customer service, and additional benefits. Thorough research and comparison can help you get the right policy that fits your situation.
Myth 14: Insurance Policies Are Too Complicated to Understand
Debunked: Policies Can Be Understood with Proper Guidance
Many of them shy away from purchasing insurance because they think the policies in place are too technical for them to understand. Indeed, insurance policy documents can be long, but in any case, the process of knowing them is not as intimidating as one might imagine.In fact, most insurance companies provide detailed brochures and customer support teams to help people understand what is covered and not covered in a policy.
Myth 15: Insurance is a Form of Gambling
Debunked: Insurance is Risk Management, Not Gambling
Some people believe insurance is a form of gambling; one pays premiums in the hope of getting an eventual return in the occurrence of perils. This myth is borne out of a misconception about the very core and nature of insurance. Unlike gambling, which is a game of chance, insurance is designed for protection, risk management, and financial planning.
The sole purpose of insurance is to safeguard you against financial loss from specific events or, in some cases, significant potential risks. You pay for it in order to transfer your financial risk of certain events to the insurer. You need to be sure of yourself and your loved ones, not to derive benefits from the possibility of loss.
Myth 16: Insurance Premiums are Non-Refundable
Debunked: Some Policies Offer Refunds and Returns
A common misconception is that once paid, premium money is entirely lost. While that may be the case in some insurance products, there are others that come with return of premium or maturity benefits.
For example, some policies such as the endowment plans return premiums or pay a lump sum at the end of the policy period. Similarly, some health insurance policies give no-claim bonuses or have the option of cash-backs. Fully understanding the features of your policy may reveal that it often includes additional benefits beyond the basic coverage.
Myth 17: Insurance Can Be Bought Only When Required
Debunked: Buy Early
One of the common myths is that people can buy insurance only when required. However, buying insurance early could be more in your interest. Most of the insurance products, including term life and health insurance, allow buying them at more affordable premiums and on better terms when the age is less or major health problems have not yet surfaced.
Early purchase also secures coverage prior to any possible changes in health or lifestyle that could affect your eligibility or the cost of your premium. The sooner you buy insurance, the more protection and peace of mind you offer your finances in the long run.
Myth 18: All Insurance Companies Are the Same
Debunked: Insurers Differ in Quality and Service
The idea that all insurance companies are alike is wrong. Big differences exist among insurance companies regarding policy offerings, customer service, and claim settlement ratios in general.
While selecting an insurance company, learn about the insurer based on factors such as the standing of the company, financial solidity, customer service, and previous records of claims settlement. The determination to research and choose a respectable insurer is what can guarantee you both means of reliable coverage and backing at the time of need.
AapkaPolicywala understands that in the complex world of insurance, it can be difficult for most people to go through. Our platform is intended to make this easier by bringing forth a clear and detailed pool of information on a plethora of insurance products and providers. We will guide you about the best policies—be it life, health, or any other insurance—in an absolutely personalized way by keeping your needs exclusively in mind. AapkaPolicywala helps you choose correctly, avail appropriate cover, and be at peace of mind for yourself and your loved ones through easy-to-use tools and expert advice.
Conclusion
Insurance is an essential financial protection tool but is surrounded by a host of myths and misconceptions. By debunking these myths, it is our purpose to create a clearer idea of the importance and benefits that come with insurance. Remember, insurance is not only for the rich and the old, but for everybody. Be it life, health, or any other type of insurance, keeping yourself well-informed will enable you to make better decisions and provide for a financially stable future for yourself and your loved ones. Also, be sure to review your policies from time to time, understand the terms and conditions, and don’t hesitate to seek professional advice when called for.