Although there has been a significant rise in the number of life insurance policies issued in India, the percentage of individuals insured continues to be low. One of the many reasons for such low life insurance penetration has to do with the many myths and misconceptions surrounding them.

Seeing as such myths tend to dissuade people from opting for life insurance, it is crucial to debunk them as and when they arise so that more individuals realise the true potential of life insurance policies. On that note, here are clarifications to 5 of the most popular life insurance misconceptions.

1. Life insurance only provides a death benefit

One of the biggest myths surrounding life insurance is that the sum assured is only paid in the case of the policyholder’s demise. This is only partially true. Only term insurance policies, which are just one of the many types of life insurance plans, tend to offer only death benefits. 

There are plenty of other life insurance policies such as endowment plans, money-back plans, and Unit Linked Insurance Plans (ULIPs), among others that are designed to offer maturity benefits in addition to a death benefit. By opting for such kinds of life insurance, policyholders can ensure that they receive benefits if they survive till the end of the policy tenure.

2. Life insurance is unaffordable

Another major misconception regarding life insurance policies is that it is very expensive. Again, this is simply not true. Compared to the level of coverage that they offer, the premiums of life insurance plans are quite affordable.

That’s not all. There are also multiple different ways to reduce life insurance premiums. For instance, you could opt for a pure life cover plan such as a term life insurance policy, which is designed to offer extensive coverage for ultra-low premiums.

3. Life insurance claims will not be paid out

Many individuals think that insurance providers tend to refrain from paying out claims. However, this is simply just a misconception. Life insurers will only reject claims under certain circumstances. This includes the life insurance proposal form containing factual or other inaccuracies, incomplete claim forms, or non-payment of premiums.

As long as you pay your premiums on time and ensure that there are no mistakes or inaccuracies, the insurance company will generally not deny the benefit payout that the beneficiaries are entitled to.

That said, if you’re still worried about your claim getting held back, you can increase the likelihood of it getting settled by opting to purchase life insurance from insurers who have a high claim settlement ratio of at least 95%.

4. Life insurance provided by employers is enough

Of late, many employers have begun to offer life insurance coverage to their employees via group life insurance policies. However, relying solely on the coverage provided by your employer is not an ideal scenario.

Firstly, the coverage offered by your employer will generally not be adequate to fulfil your family’s requirements. Secondly, you will only be eligible for that coverage as long as you’re employed with the organisation. And finally, your employer may terminate the coverage or reduce the benefits at any time citing financial troubles, leaving you uninsured or inadequately insured.

Therefore, even if you are already covered by your employer, it is always a good idea to take out a standalone life insurance policy. This will ensure that you get the right amount of financial protection that you wish to provide your family with.

5. Life insurance is only for older individuals 

Young and healthy individuals that are unmarried tend to think that life insurance isn’t meant for them and that it is designed only for older people. However, this is again just a myth. Life insurance is for everybody, whether young or old.

Seeing as life can be very unpredictable, it is important to keep yourself and your family financially protected from untoward incidents. And a life insurance policy is the best way to do that too.

Additionally, purchasing a life insurance policy when you’re young has its own set of benefits. For instance, the premiums are usually very low, which enables you to opt for extensive life cover at inexpensive rates.


These are just a few of the many myths surrounding life insurance. So, if you’re someone who hasn’t insured yourself or your family, consider opting for one as soon as possible. That said, make sure to account for your family’s requirements before choosing the sum assured amount of a life insurance policy. Remember, inadequate life insurance is equally as bad as not having insurance.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.