Insurance is one of those much-maligned financial assets due to the way it was designed and the purpose it was designed for. Insurance also a lot of bad reputation surrounding it. This can be attributed to the fact that bad news travel faster than good news. Have you heard of anyone giving genuine praises to insurance company for helping them tide over tough times with a timely reimbursement for their losses?
These myths about insurance can lead to a misunderstanding of the benefits of insurance and why everyone needs it. Thus, we decided to spend some time to help our readers debunk these myths about insurance. Ready? Let’s start busting those myths together.
4 Myths About Insurance That Needs To Be Debunked
The nature of insurance is to protect you against undesirable events in life, be it accidents, injuries, disabilities or even deaths. But these events have a low probability of occurrence. As such, most people who bought insurance will not use it at all to claim for any of these undesirable events. This means that you will not be “fully utilizing” the insurance that you have paid for. Some might even think that you are wasting your money since you are not going to use it anyway.
Just because you didn’t “utilize” your insurance doesn’t mean that it is wasted. Not “utilizing” your insurance is a good thing. Not having “utilized” your insurance means that nothing undesirable has happened to you or your loved ones.
Insurance is meant to be a safety net for yourself and your loved ones. It is not meant to be “utilized”. It is meant to protect you in case of undesirable events in life.
Insurance is classified as a type of financial asset. It is in fact a financial asset for risk management just like a stock option. Like most financial asset, people expect insurance to be money-making. However, that was not how insurance was designed to be. Insurance was designed to reimburse you and your family members against a particular risk such as your death or your disability, it should not be viewed as a tool to help you make money.
That being said, insurance companies have been redesigning life insurance to include elements of investing. This allows you to turn your insurance into a money-making asset. For example, under an endowment insurance, you can expect your maturity value to be worth more than the premiums that you have paid. You also get financial protection during the in-force period of the endowment insurance.
Mention the word ‘insurance’ and the first reaction from most people is that it is a scam. Well, insurance is not a scam. But why did insurance get such a bad reputation for itself?
One reason is that financial advisors overselling the good points of insurance and not giving policyholders enough warning about the limitations. By the end of any conversation with their financial advisor, most people think that their insurance covers everything in life. But that’s not the case.
Each insurance policy has a well-defined set of scenarios where the insurance company will make a payout. Once you have bought the insurance, it is legally binding for them to make a payout in the set of scenarios they have defined. Thus, insurance is definitely not a scam. After all, why would a scam try to make it legally binding for themselves?
Buying insurance is as much about buying the insurance itself and the trustworthiness of the financial advisor. Contact us at Moneyline.sg if you are looking for a financial advisor whom you can trust to have your best interest in mind.
The best time to get insurance is when you are still young. This is the time when you are not plagued by any pre-existing health condition to complicate the process of buying insurance. However, most young adults do not think that they need insurance. This is due to the invincible mentality that young adults have. “I’m still young and healthy. No illness can strike me down” aptly describes what these young adults think. So, why worry about insurance when you are probably not going to need it?
There are multiple reasons why this myth needs to be debunked. Firstly, just because you are young doesn’t mean undesirable events cannot happen to you. Accidents, disabilities, injuries or even death don’t bother asking about your age before they strike. Secondly, you won’t face any complications when trying to purchase insurance. Thirdly, insurance is meant for the long term. Getting insurance while you are young makes it more cost efficient for you since the premiums are cheaper.
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