From cost myths to claim settlements: Five life insurance misconceptions holding back India’s financial security drive

National Insurance Awareness Day is a moment to reflect on India’s progress in strengthening financial security and the challenges that remain. One major success story is life insurance, which has become easily accessible thanks to regulatory support, digital platforms and simplified products. Yet old myths continue to cast shadows and life insurance in India still accounts for just 2.8% of the GDP . This gap is less about access and more about outdated perceptions.

Let us explore five common insurance myths and why it is time to bust them.

Myth #1: Life insurance is not for the youth

Many in the early stages of their careers still believe that life insurance can wait. But buying it early is akin to building a strong foundation before constructing a home. The sooner you start, the stronger and more cost-effective your financial structure becomes. Premiums are lower when you are young and healthy, the coverage lasts longer. Over the past decade, more young Indians have begun recognising this, with increasing participation in protection plans. If you are earning, you are already eligible. And if others depend on you, life insurance is not just relevant, it is essential.

Myth #2: It’s too complicated to understand

Life insurance used to mean paperwork, long waits and jargon-heavy forms. But that world has changed. With the country’s digital ecosystem, insurers mobile-first platforms, intuitive premium calculators,app-based servicing,buying a policy today is simpler and faster than ever for customers, in fact same day policy issuance is a reality today. With simple language and focus of insurers on technology is enabling delivery of enhanced customer experience. What once felt complex is now convenient and accessible. Often, hesitation stems not from difficulty but from outdated perceptions.

Myth #3: Claims are rarely settled

If you think claims are often delayed or denied, the reality is far more reassuring. Leading insurers in the Indian life insurance industry have consistently maintained claim settlement ratios above 98%. A few leading life insurers settle genuine claims in one day after receiving all documents.That is not just a statistic; it reflects thousands of families receiving timely support when they need it most. Consider someone like Ramesh, who lost his father to illness in 2023. The term insurance plan claim was processed within days, helping the family cover financial obligations such as school tuition fees, EMIs etc. without any disruption. The term plan acted as an income replacement tool for the family.Such experiences, though not always in the spotlight, showcase the power of life insurance.

Myth #4: It’s expensive and unaffordable

Many people think life insurance is costly. In reality, a basic term insurance plan may cost even less than what many spend on entertainment in a month. For example, a 30-year-old non-smoker could secure Rs. 1 crore of life cover for a monthly premium of approx. Rs. 800.  Add to that the tax benefits under Section 80C, which allows deductions up to Rs. 1.5 lakh on premiums. According to Swiss Re estimates, total real-life premiums in India are projected to grow by nearly 6.9% annually between 2025 and 2029, a significant jump from the 3.8% annual average seen between 2020 and 2024.  This reflects strong confidence driven by favourable demographics, rising incomes, better customer experience, greater digital access and increased acceptance of life insurance as a crucial risk management tool.

Myth #5: It only helps in case of death

Life insurance is often misunderstood as something that only matters after death. But modern plans are designed to provide benefits to customers during their lifetime. They offer critical illness cover, disability payouts and even guaranteed income during the golden years. Imagine getting a monthly income after 60, without dipping into your savings. Whether it is for retirement, children’s education or a rainy-day fund, life insurance can work like a backup generator, powering your life when you need it most.

Be Informed, Stay Empowered

India’s life insurance sector is growing. More people are getting coverage, claims are being processed fasterand digital access is simplifyingproducts and processes. The combined efforts of the Indian Government, regulator and insurers toward the ‘Insurance for All by 2047’ goal are actively building a more inclusive insurance ecosystem. To conclude, this National Insurance Awareness Day,let’s not just be aware, but make confident, informed choices for a financially secure life.

The writer is the Chief Product Officer, ICICI Prudential Life Insurance Company Limited