Life insurance policy is critical to any financial planning. Yet it is never prioritized and is often considered complicated to decode. But it is always a good idea to invest in life insurance, more so sooner than later. Especially, since not having one when you need it can be devastating.

While there are quite a few common myths about life insurance, here is a list of the five biggest ones.

Myth 1: Single, without dependents. I don't need coverage
At the risk of sounding morbid, singles too need enough coverage to cover the costs of personal debts and medical bills. If uninsured, they could leave unpaid expenses for families to deal with. Even if single people are not saddled with such dire situations, it is a good way to leave a legacy to some cause. Also, many policies allow insurers to purchase additional coverage in the future. For example, HDFC Life offers Life Stage Protection – under Life option where the insurer can increase the insurance cover on certain key milestones of life like marriage, child birth without fresh medical test. So, the policy can be continued with changes if and when he or she decides to have a family.

Many employers too provide employees with life insurance. And even if it does seem like enough, what happens when one loses or leaves the job? Many insurance companies offer to convert optional insurance to an individual policy, but it may turn out to be more expensive than purchasing a policy in the long run. It is rather prudent to consider employer-provided insurance as a bonus.

Myth 2: Too young to think about coverage
There is no such thing as too young for life insurance. If you earn a salary, you might as well have insurance. Several independent studies and the Insurance Regulatory and Development Authority of India (IRDAI) observe that the insurance sector is a colossal and growing at a speedy rate. However, although the awareness about life insurance is increasing, the Indian youth is still misinformed about the cost.

Speaking in terms of smart finance, life insurance is financially more economical when opted for at a young age. The price of the policy is based on the age and health of the person being insured. Typically, premiums are less expensive when one is younger and healthier. When say a healthy 25-year old opts for a term policy the premium charges would be a fraction of what he/she would need to invest at later stages of life. Also, there is always a risk of developing a medical condition later on, which can make a policy much more expensive.

Myth 3: Only men need life insurance
While many families are prompt in getting a life insurance policy for the male breadwinner, coverage for the working woman is rarely factored into the financial planning. Most don’t even bother to insure the homemaker as they don’t have financial earnings. What if something were to happen to the lady of the house? Besides the emotional repercussions, the harried head of the family may need to get help to take care of the kids. And that, even in a developing nation like India, can cost a lot of money. Besides, this coverage will also give the father a chance to take time off and help the family adjust to their loss.

Myth 4: Insurance is of no use unless you die
It is critical to understand the type of life insurance that one needs to integrate in the financial plan. Term insurance is a life insurance product offered by an insurance company that offers financial coverage to the policyholder for a specific time period. Endowment plans, unit linked insurance plans (ULIPs), money back and more also cover life for limited term and post that if you survive the term – the plans provide returns unlike a term plan.


One can start by buying a term insurance, since it’s easier on the pocket and later on add other insurance products to the financial portfolio at various instances as and when required. However, the main reason for purchasing insurance is to provide financial protection for your loved ones in your absence; so it shouldn't be evaluated for returns. Also, it’s crucial to know that insurance policies are tax free.

Myth 5: Better to invest the money rather than lock it up in life insurance of any kind
Everyone, irrespective of their financial standing, needs life coverage. Solely depending on investments is not wise. It could mean that in case of an untimely death, the investor would leave very little provision for dependents. That would hit the family finances really hard after the depletion of assets.

It is important to think of life insurance as a way out to help in continuing life as usual when something unusual happens, and not as an instrument where money would be locked in for a long period.

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