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Life insurance, while imperative, has been treated as a secondary need for far too long. The Economic Survey 2018 pegs life insurance penetration at 2.72% (as a ratio of premium underwritten in a given year to the GDP), illustrating the fact that insurance penetration is significantly poor. Another concerning factor is that, of those insured, a massive majority is underinsured or to explain simply, inadequately insured.

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Traditionally, buying life insurance has been a prolonged and delayed process, with customers considering and re-considering the purchase. In part, the perceived complexity of products has led to customers' uncertainty about buying this instrument. Add to this, several misconceptions about life insurance.

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Life insurance, a cost-effective instrument to secure your loved ones, is an important component of financial planning. It is disconcerting that several people do not buy life insurance under misconstructions like I am too young to buy a life insurance, I am a healthy individual and nothing will happen to me, and more.

It is only a tax saving tool

Perhaps the most widespread misconception is that life insurance is only a tax saving tool. Yes, buying a life insurance does provide you with the perk of tax saving, but that should not be the first and only reason why you buy it. It can help you not just effectively provide for your family but also serves as a good wealth accumulation and enhancement tool. A host of benefits like critical illness, accidental cover, waiver of premium and more help you ensure that unforeseen events do not make a big dent in your savings.

Only the breadwinner needs life cover

A homemaker undertakes several important tasks like managing the household, caring for children and tutoring them, cooking and more. These duties are vital and would be a considerable expense if the homemaker does not carry them out. If anything, the homemaker is helping curb expenses and save money. So, don't be quick to discredit the idea of life insurance for them.

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The bread earner should, in fact, ensure that their policy also provides cover for their stay-at-home spouse. Remember that your absence would shift the financial burden onto your spouse and in such an event buying a term plan would be the last priority for them. Factors like age and health might push up premiums, translating to inadequate cover. It is also advisable to buy an endowment plan for a stay-at-home spouse to ensure the financial impact on the family in their absence.

Life insurance is expensive

This cannot be farther from the truth. With proper research and the right advice, you can buy a policy that costs less than Rs 5,000 annually for a cover of Rs 50 lakh. If you are buying young, a term insurance would cost you even lower, as a younger individual is typically healthier and has fewer assets to cover.

Those with health issues cannot get life cover

While individual cases might differ, having health issues does not necessarily discount you from getting a life insurance. It might affect the premium payable on your policy, but you could buy the cover nonetheless. Insurers also provide lumpsum benefits on the diagnosis of certain critical illnesses predefined in the plan. Considering the fast lifestyle that we indulge in, buying such a cover even at an additional expense is worth it.

Those with no loans don't need life cover

Servicing a home loan, especially when you are the only bread earner in your family, is a genuine concern. Buying an insurance cover to protect your dependents against this burden is right. However, one must think beyond financial liabilities. Unforeseen circumstances like disability can sever your earning capability and cause a huge burden on your family.
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The writer is chief retail officer, Edelweiss Tokio Life Insurance

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