Let’s be honest. Nobody wakes up on a Sunday morning excitedly thinking, “Today is a great day to buy term insurance!” It’s morbid. It forces you to confront the one thing we all desperately try to ignore: our own mortality.
We’d much rather talk about the latest IPO, real estate trends, or which mutual fund is giving 20% returns. Insurance? That’s just a grudge purchase. An expense. A necessary evil at best.
And because we hate thinking about it, we rely on hearsay. We listen to our uncle at a family gathering, or a pushy bank agent trying to meet targets, or just plain old “whatsapp university” rumors. This haphazard approach is dangerous. When you get investment advice wrong, you might lose some money or earn less profit. When you get term insurance wrong, your family loses their financial future when they are already dealing with the emotional devastation of losing you.
I’ve sat across tables from families who realized too late that what they thought was a safety net was actually full of holes. The difference between a secure future and financial chaos often comes down to believing a few stubborn myths.
Here are the biggest term insurance lies that end up costing families lakhs, sometimes even crores, right when they need the money the most.
The “Waste of Money” Mentality
This is the granddaddy of all insurance myths.
The Myth: “If nothing happens to me during the policy term, I get zero rupees back. All those premiums were just wasted money. I should buy something that gives me a maturity benefit.”
The Reality: This way of thinking fundamentally misunderstands what insurance is.
Term insurance is pure risk protection.1 It is not an investment vehicle.
Think about your car insurance. You pay a premium every year to insure your vehicle against accidents or theft. If you drive safely for a whole year and don’t crash, do you call up the insurance company and demand your premium back because it was a “waste”? Of course not. You paid for the peace of mind that if something terrible happened, you wouldn’t have to pay lakhs out of pocket for repairs.
Term insurance is the same principle applied to your life, which is infinitely more valuable than a Maruti Swift.
The problem arises when people mix insurance with investment. They buy endowment plans or money-back policies because they promise a return “even if you survive.” The catch? The insurance cover in those plans is usually pathetic—often just 10 times your annual premium—and the investment returns are barely beating inflation.
To get a decent ₹1 Crore cover through an endowment plan, you’d probably need to pay a premium of ₹3-4 lakhs a year. Most people can’t afford that, so they buy what they can afford (say, ₹50,000 premium) and end up with a tiny cover of ₹5 lakhs. That’s peanuts today.
A pure term plan gives you that same ₹1 Crore cover for maybe ₹10,000 to ₹15,000 a year (depending on your age). Yes, if you survive, you get nothing back. But that’s a good thing! It means you are still alive to earn for your family. The premium was the cost of ensuring your family didn’t fall into poverty if you weren’t lucky.
Don’t look for returns here. Look for the biggest umbrella for the lowest cost.
The “Corporate Cover” Cushion
This one is incredibly common among salaried professionals in metro cities.
The Myth: “My company provides group life insurance of three times my CTC. That’s enough. Why should I buy a separate personal policy?”
The Reality: Your corporate cover is a nice bonus, but relying on it as your only safety net is terrifyingly risky.
Firstly, is it enough? If your annual income is ₹15 lakhs, your corporate cover might be roughly ₹45-50 lakhs. It sounds like a lot of money. But sit down and calculate your home loan outstanding, your kids’ future education costs (factoring in 10% education inflation), and regular household expenses for the next 15 years. That ₹50 lakhs will evaporate in three or four years, tops. Then what?
Secondly, and more importantly, that cover is tied to your job slip. It’s not yours; it’s rented.
What happens if you get laid off? What happens if you decide to take a six-month sabbatical to upskill or switch careers? What if you quit to start your own business? The moment you walk out that office door on your last day, that insurance cover vanishes. You are suddenly completely exposed.
And here’s the kicker: if you develop a health condition during those years, buying a new personal policy later might become incredibly expensive or even impossible.
Treat your employer’s insurance as the cherry on top, not the whole cake. You need your own policy that stays with you regardless of who signs your paycheck.
The “I’ll Buy It Later” Procrastination
The Myth: “I’m only 26 and healthy. Why should I block money in premiums now? I’ll buy it when I’m 35 or when I have kids.”
The Reality: Waiting is the single most expensive mistake you can make with term insurance.
Insurance companies aren’t charities; they are masters of probability. The younger you are, the lower the probability of you dying. Therefore, the premiums are dirt cheap.
When you buy a term policy, you lock in that premium for the entire duration of the policy (usually until you turn 60 or 65).2
Let’s look at some rough numbers. A healthy 25-year-old non-smoker might get a ₹1 Crore cover for roughly ₹8,000 a year. If that same person waits until they are 35 to buy the same cover, the premium might jump to around ₹15,000 or ₹18,000 a year.
That doesn’t sound too bad, right? An extra 7-8k a year?
But do the math over the long haul. If you pay that extra amount every year for the next 25-30 years, you end up paying literally lakhs more in total premiums for the exact same product.
Furthermore, your health at 26 is likely much better than your health at 35. In that decade, you might develop borderline sugar, slightly high blood pressure, or gain significant weight. Any of these flags will cause the insurer to load your premium (increase the price) even further, or worse, deny you coverage altogether.
Buying term insurance when you are young and healthy isn’t blocking money; it’s securing the cheapest possible rate for life.
How to approach it the right way
Okay, enough doom and gloom. If you’ve realized you need to fix this, how do you actually go about it? It’s not rocket science, but you need to be methodical.
1. Calculate the ‘Right’ Coverage Amount
Don’t just pick an arbitrary number like ₹1 Crore because it sounds nice. Everyone’s life is different. A thumb rule is 15 to 20 times your annual income, but it’s better to be specific.
Add up:
- All outstanding loans (Home, car, personal).
- Future one-time goals (Kids’ higher education, marriage).
- Monthly expenses for your family to maintain their lifestyle for at least 15-20 years.
Subtract your existing liquid assets (FDs, mutual funds, stocks—don’t count the house you live in).
The gap is what you need to insure. If the number scares you, you’re doing it right. Please consult your financial advisor before finalizing this number to ensure it aligns with your overall financial plan.
2. The Truth, The Whole Truth, and Nothing But The Truth
When filling out the proposal form, honesty is not just the best policy; it’s the only policy.
Do you smoke occasionally at parties? Tick ‘Yes’ for smoking. Did your father pass away early due to heart disease? Mention it in the family history. Do you take medication for anxiety? Declare it.
Many people hide these “minor” details fearing a higher premium or rejection. But here is the thing: insurance companies have investigators. If a claim arises later, and they find out you lied on the application form about a material fact, they have legal grounds to reject the entire claim. Your family gets nothing.
Don’t pay premiums for years just to have the claim denied because you didn’t want to admit you smoke a cigarette once a month.
3. Keep it Simple
You don’t need complicated bells and whistles. A plain vanilla term plan is usually best.
You might consider riders (add-ons) like Critical Illness or Accidental Death Benefit, but evaluate them carefully. Sometimes, a standalone critical illness policy is better than a rider attached to your term plan. Don’t let the main goal—death benefit—get diluted by confusing add-ons.
The Final Takeaway
Term insurance is probably the least exciting financial product you will ever buy. It gives you no thrill of returns, no tax-saving euphoria that feels like ‘winning’, and no maturity bonus to look forward to.
But it is the foundation of your family’s financial house. Without it, all your SIPs, your stocks, and your real estate investments are built on sand. If the main earner is removed from the equation, the whole structure collapses within months.
Stop looking for returns on your insurance. The return is that your family won’t have to sell the house or compromise on your children’s education if you aren’t around to provide for them. That peace of mind is worth more than any maturity bonus.