Common Insurance Misconceptions

No doubt, earning money is important but growing your income and how to save it in order to meet your short or long term goal is more important. For this, it is very essential to understand the basics of investments such as:

• Where to invest
• When to invest
• What to add in portfolio
• When to withdraw money

Due to lack of insurance knowledge, many a times people are cheated with insurance mis-selling or they end up buying insurance policy with objective of getting good return. So here are few misconceptions about insurance before buying any policy:

1. The first misconception is that insurance is best investment option for tax savings. At the end of financial year, most of the salaried individuals buy insurance policy with an intention to save tax, which is actually a very big mistake. Because in reality, insurance should be purchased only to cover risks and not for saving taxes.
2. Second misconception is that investors purchase policy in the name of their wife and child for their better future, mainly child ULIP plan. Always remember that life insurance should be purchased only by those whose family is dependent on single income source. It means that if you are the only earning person in your family then you should buy insurance policy.
3. My company provides me health insurance which is sufficient and I don’t need any another insurance. Remember that group insurance is sufficient till the time you are employed with the same company. Imagine that, at the age of 40 years you decide to move on to another job, in such a scenario you’ll also loose your health cover. At this age, if you decide to buy a new policy then your premium would be high. Therefore it is essential to buy health insurance separately even if you have a group plan.
4. Most of us think that term insurance is not good. We have a thinking that – there are no returns even after investing money. But remember that for life cover, there is no better alternative to term insurance as it is cost effective. Therefore for life cover, there is no need to buy ULIP or other complicated products and instead just rely on term plan.
5. Last but not the least, I am single – why should I buy life or health insurance policy. Although you are right, but imagine that some medical emergency arises and you are diagnosed with some health problems leading to increase in hospital expenses, then this will kill your savings. That is why it is recommended to buy health insurance policy at an young age as premium would be very less.