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Many people have a lingering doubt in their minds. Is there any real value they get out of Life Insurance? The answer undoubtedly is YES. But to understand the true value, you need to compare how life would look like without Life Insurance.
Essentially Life Insurance Plans are of two types. The first one covers the financial risk of a family when the main breadwinner dies too young. This type of Life Insurance is referred to as Term Insurance. Because, these Plans are for a fixed term of 15,20,30 or so years of a person’s life that is insured.
The second type of Life Insurance covers the risk of living too long. That is, if a person lives too long beyond the period when he/she stops earning income, the person would have financial problems unless there is a sum of money made available through Life Insurance. This type of Life Insurance is referred to by a variety of names – Endowment Plans, Money Back Plans, Retirement Plans etc., depending on the specific features of Insurance. For our purpose, let’s call them Savings Plans- since basically these are instruments of Savings which help the person accumulate personal savings during the earning period and use the money after retirement or for specific purpose. We will talk about the value of these Plans in later posts.
In the first case, Term Life Insurance is unique and there are no parallel opportunities to cover financial risks in life in a better way. The case for Life Insurance gets stronger if the person has financial commitments and the family is dependant on a sole source of income. For a very little amount, one can insure for millions of rupees, provided he/she is young and healthy. Even if the person is not so young and so healthy, Insurance is available at slightly higher prices. The downside risk of not having such a cover is enormous on a young family’s financial future. The children could miss schooling, higher education and family could be driven into poverty if a mishap snatches the main breadwinner away from the family.
Now, most of us think that it’s very unlikely that death would happen while we are seemingly so young and strong. Yes, statistically speaking the probability is low but so is the case, for having airbags in cars, life jackets in airplanes, life guards at swimming pools, for vaccination against Polio, Tuberculosis, etc. But no rational person would suggest that we do away with these safety precautions just to save a few thousands of rupees. Same is the case for Life Insurance. It’s sensible, practical and hassle free way of ensuring financial security for a family for a fraction of our normal living expenses.
Many people have another question-Term Insurance does not offer me anything while I am alive. Why should I buy it?
This assumption is wrong. Term insurance does offer peace of mind, feeling of security for the family- these are intangible benefits a person can enjoy while he/she is alive. Not everything we spend is for ourselves. We spend a lot of money for the benefit of our loved ones. Life Insurance is one such key thing you should not miss.
Recommendation:
Go for Life Insurance without hesitation, especially if you are the main bread winner in the family.