Common Fallacies Regarding Life Insurance

A life insurance is an agreement between an insurer (commonly any insurance company) and an insurance policy holder (known as insured), where the company guarantees to make payment to a chosen beneficiary an agreed upon amount of money (known as insurance benefit) upon the death of the insurance holder. Based on the agreement other events like critical illness or terminal illness may also generate payment.  The insured normally pays premium for the insurance, either as a lump sum amount or in regular installments. Term insurance policies are commonly different from whole life insurance policies, where paying an agreed upon amount of premium regularly or as a lump sum, the insured can have protection against risk and couple times more money (as per the agreement) back at the end of the term.

Life Insurance Policies (Image Reference)

Insurance means “sharing of risk” among a number of people. And life insurance commonly helps the insured to have sufficient amount of money for health treatment purposes and funeral. It also helps the beneficiaries of the insured financially upon the death of the insured. Term insurance policies are regarded as healthy investments too. Yet, some people don’t want to have life insurance policies. There are a number of fallacies that cause them not to get insurance policies.

Following are some of the top common fallacies regarding life insurance policies:

Life Insurances Are Costly

This is the most common misconception that people have regarding life insurance policies. Some people simply think that insurance policies are so costly that they can’t afford them. But the actual fact is that there are a number of affordable policies and anybody can choose any one of those based on his or her ability. Term life insurance policies are typically more affordable than whole life insurance policies. One can simply get any term insurance policy and be assured for that period of time and also can have a considerable amount of money back once the term ends.

 Life Insurances Are Unnecessary

This is a general misconception. Some young people especially under the age of 30 without any family consider life insurance unnecessary. The main reason behind this misconception is their lack of knowledge about different kinds of life insurances and advantages of those life insurances. They are likely to understand the necessity of life insurance after anything unpleasant happens to them. They become incapable of working while maintaining living expenses and paying the mortgage. At this stage, they understand the financial security that life insurance can provide them. To make certain they are protected, first of all, they need to assess different risks around them. One must remember, the best time to have a life insurance is under the age 30 as life insurances are comparatively cheaper in early ages.

Life Insurance Is Just a Trap

Some people simply consider life insurance as just a trap. People are so busy doing so many things to earn money. They are ready to do anything that gives them financial and health security but when any insurance agent or salesperson comes to them, they try to avoid the insurance agents. They don’t want to listen to the agents as they think that they may fall into a trap. But the actual fact is that life insurance policies can give them the utmost financial and health security.

So, one must know the financial and health security that life insurance can provide them.