During various life stages, one thing stays constant—the need for long-term financial security. Life insurance is a vital tool that helps ensure the financial well-being of our future. However, multiple misconceptions delay the early purchase of an adequate life insurance policy. The result: 83% of the Indian population remains underinsured, contributing to a life insurance protection gap of over $17 trillion (Swiss Re, 2023), the largest in the world. These numbers highlight the coverage deficit and represent millions of aspirations that run the risk of staying unfulfilled because of the protection gap.

Here, we aim to dispel the most common myths around life insurance to enable people to embrace it with clarity and confidence.

Myth 1: Life insurance is complicated

At first glance, people get thrown off by the jargon or shy away from sharing their personal or medical details while obtaining any policy. However, the core principle of life insurance is simple—in exchange for paying regular, periodic payments, the family receives financial support in the unfortunate event of the policyholder passing away. The coverage begins from day one—no waiting periods, no ambiguity. Today, with digital platforms, apps, websites, simplified interfaces, and AI-driven advisory tools available at the touch of your fingertips, policies have become easier than ever to comprehend and manage.

Myth 2: A term plan alone is sufficient

A term plan is a cost-effective entry point to life insurance. However, it’s not always sufficient. While it provides pure risk coverage, many individuals require long-term savings options, retirement planning, and wealth preservation tools. Life insurance is a financial protection tool that provides you with strategic financial stability to enable various milestones in life, including children’s education, their marriage, or your post-retirement needs.

Myth 3: Buying life insurance is not beneficial to me, so why spend?

This is the most common misconception about life insurance. Life insurance was never a tool for immediate gratification; it is about securing you and your loved ones’ dreams and aspirations. It is like planting a seed, which, when it grows into a tree, provides shade for future generations. Life insurance ensures your family’s financial independence even in your absence. Several life insurance products also offer survival benefits in case of critical illness or disability, allowing policyholders to secure financial payouts during their lifetime. It establishes a platform where the insurer can support both protection and personal goals.

One of the biggest myths surrounding life insurance is that it is only a tax-saving instrument. While sections 80C and 10(10D) of the Income Tax Act offer benefits on premiums and payouts, life insurance’s real purpose goes far beyond. Tax savings are just a supplementary advantage. The underlying factors that influence the investment decision can include security & assurance, future debt issues, retirement plans, long-term plans and aspirations, risk coverage and savings, and family welfare.

Myth 5: Life insurance means paying premiums for life

Contrary to popular belief, not all life insurance policies require lifetime premium payments. Many insurance plans offer flexibility in premium payment terms, such as limited-pay policies, single-premium plans, and shorter-term insurance. More importantly, life insurance locks in protection early, ensuring policyholders benefit from lower premiums and long-term security, even if income streams stop.

Myth 6: The claim process comes with multiple hidden rules and regulations

As per the IRDAI, 96.82% of life insurance policy claims lodged with Indian life insurers for FY 2023-24 were settled within 30 days. It was a period that coincided with the fallout of the COVID-19 pandemic, and the life insurers settled all valid claims promptly. It indicates the industry’s stability over the years. Regulatory reforms have also streamlined the claim process, reducing settlement turnaround times from 90 days to just 45 days in investigative cases. Most claims can be raised through digital means by uploading the required documents from personal devices. The pre-approved list of documents allows nominees to complete the process quickly.

Myth 7: Young adults, be they single men or women, don’t need life insurance

When you buy a material possession, such as a car or home, you insure it to protect your finances. Likewise, as soon as young professionals start earning, they should protect their income. Even if you don’t have dependents today, buying life insurance early has multiple advantages, including lower premiums and better coverage due to better health indices. Starting early also caters to the need for long term savings. Starting early ensures that a young earner’s liabilities, such as student loans, are repaid undisrupted, and their sudden loss of income does not burden family members.