Financial experts have always advised on the importance of a life insurance policy. They state that the policy should form a part of your financial portfolio. But how many of you take this advice?
Unfortunately, not many! As per the ‘Transformative Agenda for the Indian Insurance Industry and its Policy Framework’ report written by ex-IRDAI member H. Ansari and Arun Agarawal, insurance penetration in India is only 3.42% and the Indian insurance market contributes less than 1.5% of the world’s total insurance premium despite having the second highest population. (Source: http://www.financialexpress.com/market/insurance-penetration-in-india-at-3-42-far-below-global-average/740295/).
Is ignoring a life insurance policy a wise decision?
No, it is not. But if you are not convinced and are thinking of giving a life insurance policy a miss, ask yourself these questions first –
Would my family be financially secured if I am not around?
The whole purpose of earning money is to provide for your family. Only when the family’s bread-winner brings in money can the family use the money on fulfilling their basic lifestyle requirements. What if the bread-winner suddenly dies? Would the family be able to sustain itself?
If you are the sole bread-winner of your family, you would know the answer to this question. Ask yourself whether your family would be able to meet its financial obligations in your absence. If they can’t, a life insurance policy is a must. Life insurance plans, especially term plans, provide your family a financial security in the event of your premature death. So, if you are avoiding insurance, think again.
Would my investments be sufficient for my family’s safety if I were to die early?
In the answer to the first question about your family’s financial security, many of you believe that your investments would come in handy. People have the misconception that the investments that they are making would be sufficient for their family’s needs. Would they?
While it is commendable that you invest, you need to stop and ask yourself whether your investments would be sufficient if you don’t wake up the next morning. If they would be, you are the lucky few who have the privilege of dying rich. But if they are not, missing life insurance would be a very grave mistake.
Would my child’s future be secured if I am not around to plan for it?
Children are the apple of every parent’s eyes. Every parent desires that their children receive the best upbringing and education. But bringing up a child and ensuring a good education requires money, money that you save during your lifetime so that your child’s financial security is ensured. But what if your lifespan is cut short? If you haven’t planned for your child’s future, can the future be secured?
Is my retirement corpus earmarked?
Living too long is another risk which you must prepare against. Retirement, though distant, is a certain part of your life. While you prepare to plan your finances for the contingency of early death, retirement planning is also essential. Post retirement your income stops but expenses don’t. That is why you need a dedicated retirement corpus to pay for your expenses. Though many of you try and accumulate this corpus during your active working life, many fail in securing a substantial corpus. The main reason of this failure is the lack of a dedicated investment meant only for retirement. Do you have an exclusive corpus only for retirement?
Would I be able to ensure enough savings to suffice my family’s growing needs despite inflation?
While the first question addressed your family’s financial security, you cannot ignore your family’s growing needs. The basic financial needs, after food, clothing and shelter, include medical expenses, marriage, childcare needs, maintaining a standard of living, etc. You cannot ignore the effect of inflation on your family’s financial needs. While today your family’s monthly expenses might be Rs.50, 000, a decade or two later the same expenses might amount to Rs.80, 000 or Rs.1 lakh. Are your savings sufficient to meet such rising expenses on various family needs?
If skipping insurance is on your mind, think again. Seek answers to the above-mentioned questions. You would be surprised to know how insurance provides an easy solution for all the above questions. A term insurance plan secures your family’s finances and enables a high amount of coverage so that the benefit paid is sufficient to cover your family’s financial obligations easily. Similarly, a child plan ensures the financial security of your child. If retirement planning is on your mind you cannot go wrong with a pension plan which pays you lifelong incomes. Lastly, for inflation adjusted returns, unit linked plans are the perfect solution. So, don’t avoid a life insurance plan. Buy a term plan and secure your and your family’s finances.
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