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5 Myths About Term Insurance

By Vikas Chandra Das
21 July 2022, 11:46 AM
revealed 5 myths about term insurance

Term Insurance is the most essential and simple form of life insurance. However, it is one of those financial products which are quite misunderstood among the policyholders. Despite term insurance plans being the purest form of life insurance; it has never been a popular choice among the people. The main reason behind this being the misconceptions and myths around the term plan and the benefits it offers.

Let us check out the 5 popular myths related to term insurance plans which can be debunked to help you make decisions related to Term Insurance easily.

Myth 1 – Term Insurance Plans are Restricted to Death Benefits Only and Hence not a Good Investment Option

It is a very common misunderstanding about the term life insurance plans that it is not a good investment as it does not provide any lump sum amount on maturity like the other financial products in the market.

Term life insurance plans do not provide a lump sum amount on maturity but they cannot be considered as a waste of money. Because it has huge benefits which no other investment or insurance product offers 

You can think about an adverse situation when you meet an untimely death and your family would have to face a huge financial crisis. Here the term insurance plan would act as a saviour. If the coverage amount has been calculated properly then your family will not face any financial difficulties despite having a huge loan amount to be paid.

Moreover, the benefits obtained from a term insurance plan depend upon the plan you have chosen. And the riders that can be bought along with the base insurance plan to customise it. If you have chosen an accidental death and disability rider (ADDB) that would be helpful in case of any disability caused due to an accident. Or a term plan along with a critical illness rider which would offer a lump sum payout on diagnosis of a mentioned critical illness. 

Not just that, here’s a term plan variant that offers a return on maturity. Yes, life insurance companies are also offering such term plans, Term Plan with Return of Premium (TROP). If you have opted for the return of the premium term insurance plan then you would obtain the entire premium amount if you survive the tenure of the policy, i.e. survive till the plan’s maturity. 

Myth 2 – If You are Single, You Would not Need a Term Insurance Plan

It is usually a misunderstanding that term insurance plans must be purchased when you are married and have a family. 

However, it is a huge misconception that if you are single, you would not need a term insurance plan. Even if you are single, you would need a term plan for a payoff of the loans you have i.e. personal loans, home loans, business loans for your start-up, or even auto loans. You would never want your family to face a situation where they have to pay off the loans which you have taken in case of your sudden untimely demise. Moreover, in case you are the only earning member in your family, then your dependents would need a back-up for maintaining their lifestyle.  

The sum assured amount might be less than that of the term insurance plan purchased by a married person, but it does not mean that there is no need for a term insurance plan at all if you are single. For life’s uncertainties do not see whether you are single or married. Better to make sure your loved ones live financially burden-free lives in case of an eventuality.

Myth 3 – Term Insurance Plans are Quite Expensive

It is always assumed that the term insurance plans are quite expensive.

However, this cannot be true. Term insurance plans are the insurance products that would offer very  high life coverage at low premiums.  Term Insurance Plans can be considered as the least expensive option available in the insurance market. 

On comparing other life insurance plans with term insurance plans, it is the most affordable plan with the highest life cover. For instance, a 30 years old non-smoker male can get a life cover of INR 1 crore of term plan in just INR 11,000 as an annual premium.

Term life insurance would help in providing a very high sum assured in case of your untimely demise.

Myth 4 – The Coverage Must be for Your Present Income Only 

The fact is that you would be covered for your income in the future. If you have a cover for your present income then it would be helpful for your family only for a short duration. The cover you require can be stated as a function of the liabilities you have and your income. The term insurance cover which you are selecting must be sufficient for the replacement of your present income so that your family would be able to maintain the current lifestyle and also pay off the outstanding debts. In case, you have an annual income of more than INR 7 lakh then the cover provided by your term insurance would be 15 times your income. If you have an annual income which is less than INR 7 lakh then the adequate cover must be 20 times your annual income.  

Myth 5 – If Your Company has a Group Term Life Insurance Policy, You do not Need to Buy Another Policy

Your employer must be providing the benefit of a group term life insurance policy, but these policies would have certain limitations.

  1. The cover provided by the group term life insurance plan might not be adequate for your entire family. Your employer might be providing a cover of around INR 25 lakh but it would still be insufficient for your family to meet their future goals.
  2. Group term life insurance cover would be valid only until the time you are working with the employer. In case, there is a gap in your employment then your family may not have adequate  coverage and would be vulnerable.
  3. Usually, employers purchase Group Term Insurance plans which would be suitable for their terms and conditions. But, mostly you as an employee may not have much say in this. For instance, your term insurance cover would remain the same unless you have a promotion or a salary increment irrespective of any changes in your life stage such as getting married or becoming a parent, etc.


So, term insurance plans help you in arranging adequate financial security for your family at a nominal premium. Hence, it is advisable to avoid the different types of misconceptions related to term insurance and purchase one for the security of your family.

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