Myths about insurance
For many people, insurance is just another form of investment. They buy one or two life insurance policies , and then forget all about them.
Ask them about other insurance covers—accident , health, or household valuables—and they will tell you that that's a waste of money. Why pay a premium for a health insurance cover, when you're in the pink of health, they will argue.
Insurance advisors say mistaken notions about insurance are surprisingly widespread and persistent, and that this is the reason an alarming number of people are underinsured or even uninsured.
"Most people have picked up certain assumptions over the years, and it is very difficult to convince them otherwise," says an insurance agent of the Life Insurance Corporation of India.
"Even after the opening up of the insurance industry, some of these wrong ideas continue to play an important role in the decision-making process."
Two life policies are enough
Insurance agents say this is one of the most common statements they hear from clients. However, when probed further about the amount of the cover , agents say, it turns out that they have a total life insurance cover of Rs 2 lakh, which is not enough for any earning person .
"Insurance companies never effectively convey the basic idea behind life insurance . They push expensive products like unit-linked plans, and the real message is lost somewhere," says an investment advisor.
Insurance is like investment
Says the insurance agent, "For most people, insurance is about saving on taxes, or about pocketing the money and returns when their policy matures.
They don't consider the real reason behind buying life insurance cover, which is what would take care of your dependents if you were to pass on."
In other words, when clients treat insurance products like investment products, they end up buying the wrong product for wrong reasons.
Healthy people need no cover
Another popular misconception is that health insurance is not required if you're healthy. In fact, the small premium you pay to buy a health insurance cover is the price you pay to be prepared in case of an eventuality in life.
"People don't realise that premiums are lower for younger people. Also, if you were to have a sudden medical problem, you would be forced to spend out of your pocket," says the insurance advisor.
"And if you had a pre-existing disease, the premium rates would go up, or you'd have to pay part of the cost of treatment . You could even be denied a cover if your illness were serious."
Insurance is a waste of money
Another refrain that insurance salesmen encounter often is that spending on insurance is not really necessary, especially if it will yield no returns.
It seems people are not comfortable with the idea of buying renewable insurance for their health, valuables, and other general cover. If they don't make a claim in a year, they feel the premiums are wasted.
"Most people don't fully grasp the fact that annual premiums are a small price to pay for taking care of a medical issue or a mishap," says the insurance agent.
"For example, you can get a health cover of around Rs 5 lakh for an annual premium of around Rs 5,000. Only you can decide whether you want to fork out the rather modest sum of Rs 5,000 a year, or cough up Rs 5 lakh when you have a medicalemergency," says the investment expert.
He points out that your financial or investment plan would be derailed if you had to shell out that kind of money to get medical treatment or to replace an expensive possession.
Many people are unaware about the specific covers available in the market to take care of specific insurance needs. For example, insurance advisors say, most people don't know they can insure their expensive televisions or laptops.
"Apart from life and health insurance , most people know little about other covers, such as for their business establishment . For example, even qualified professionals like doctors don't know that their clinic can be insured," says an insurance agent.
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