When someone talks to you about life insurance, do you just shut your ears and wish you could disappear? Life insurance talk is often perceived as a nuisance, and sometimes the implicit talk about death horrifies us, when in fact it should be about making us feel more secure. Through this article we hope to set the record on life insurance policies straight!
What is life insurance?
Life insurance is a protective policy taken out for a specific amount on a person, insuring their existence and ability to earn. This means that if you have a life insurance policy and you die or become disabled, your nominee or estate will be given the money that you insured yourself with. To guarantee that your insurance money is remitted at maturity or after your death, you have to ensure that you pay the premiums at the right time, regularly.
5 things you should stop thinking about life insurance
1. I’m too young/old to need life insurance
There could be no notion further from the truth than this. It does not matter how young or old you are, life insurance is something that you need to have. Imagine a situation where you are 27 and married, been working for a few years and you meet with an accident (touch wood!). If you pass away, what happens to your family’s income? If you are left disabled and unable to continue working, what happens to your income?
Related: Do You Need Health Insurance, Even with MediShield Life?
2. There are no returns with life insurance
Once again, a misnomer that discourages people from taking life insurance. If you look at endowment plans, you do get a return from the insurance policy. These days you can even use insurance policies to ensure that when your children grow up, you have money to fund their university education. These funds can come from a life insurance policy.
Related: The 101 on Education Endowment Plans for Your Child
3. I can’t use it to gain income tax benefits
Well if you consider the fact that if your CPF contributions are less than S$5,000, then you are eligible to claim what the IRAS refers to as Life Insurance Relief. Under this scheme, if you meet the eligibility criteria then you can show your life insurance premium expenses and get a reduction on the income tax due.
Related: [Infographic] 6 Ways to Reduce Your Taxes in Singapore
4. Now that I have insurance I am covered at all times
This could be a very dangerous assumption to make simply because you are not considering the fact that there are times when insurers can refuse payments. This is where the list of exclusions comes into the picture. Exclusions are a list of situations under which your life insurance is null and void. Such situations could be things like engaging in extreme sports or racing vehicles. Basically any scenario where you intentionally put yourself in harm’s way.
Related: Does Your Insurance Policy Cover Your Active Lifestyle?
5. I got life insurance with an investment component, now I don’t need to invest
Many people believe that life insurance is an investment in itself and that once you get a policy, you’re done investing. This is wrong because while some policies do provide returns and surrender values, they can’t be your only savings/investment. Many a times the returns on a life insurance policy alone are not enough to fund future plans and needs. Additional investments will be needed.
Related: 7 Questions You Should Ask Your Investment Advisor
6. I just don’t understand it so I’ll invest in other things
Now this is a situation where you try to get an insurance policy and you find it all too confusing and you give up. Sometimes you may say that instead of insurance you’ll invest in something else like a mutual fund but that would be a mistake. The main thing to remember here is that insurance is not an investment, it is a way to augment your savings. You can invest in anything you’d like but a life insurance policy can ensure that your family doesn’t lose out if something happens to you.
Additional read: You Have a Life Insurance Policy Through Work. But is that Enough?
These are some common myths and misconceptions that many of us have about life insurance. The best thing for you to do is to read this, understand it and share the knowledge with others. Remember insurance is not the be all and end all of savings or investment, but it is still an important part of it.
So what myths about life insurance have you heard that you’d like us to clarify?
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