Tax filing time is here and as usual, I am in a tizzy over gathering the relevant information, dreading my accountant’s lectures about not doing it at the last minute. Not that I can avoid it, ha ha. As I tallied my life insurance to show against Section 80C of my return, my accountant mused over why people hesitate to buy life insurance. I mean, one might assume that this is an essential tax saving investment. Even I know that.
Truth is, several myths surround life coverage plans. Often people think they are well off financially without securing their lives. Some even believe they are on the right path to achieve financial independence post-retirement. Mediclaim policies, family health insurance, ULIPs and life insurance have many misconceptions surrounding them.
Life plans are fundamental for long-term financial planning as they provide security for the family as well as bring the benefit of savings. However, a number of people do not think about getting insurance coverage.
Here are four common reasons that come in the way of getting life insurance cover.
1. “It is too expensive”
The premium on the life insurance policies is often considered expensive. But this not necessarily accurate as several affordable plans are now available. Insurance companies offer different products to suit the diversified needs of individuals without causing financial strain, while giving the advantage of sufficient coverage to the policyholder.
Take the term plan, for example, which is relatively low premium and an affordable option that allows higher coverage. Unlike regular life policies, term plans do not come with survival benefits for the policyholder. Instead, the benefits under these policies are paid to the beneficiaries in the event of the policyholder’s death during the insurance tenure.
2. “I don’t need it”
Also called the “no-responsibility” factor. Most youngsters in their early 20s live with their parents and earn a good income. In most cases, the parents may also still be working, thereby reducing their responsibility. In such situations, the young adults do not think about life coverage. They fail to understand that their parents are getting older and will retire soon. They do not realize that they might have to take on the responsibility of supporting their parents.
An insurance policy assures the financial security of loved ones if the policyholder suddenly passes away. Even if the situation doesn’t arise, getting insurance coverage early in life encourages savings and builds wealth via the compounding effect.
3. “I already have enough life cover”
Many empooyers offer insurance coverage to their staff via group plans. Those icovered under these plans do not consider it necessary to get additional insurance. However, the experts advise individuals to get insurance coverage that is at least ten times the earnings to ensure sufficient security for the family.
A group insurance policy does not offer high coverage, which makes it necessary to purchase individual plans. Moreover, when a person switches jobs, until he or she becomes employed again, insurance is unavailable and so, not having individual cover is risky, both for them as well as the family.
4. “My spouse/child already have an insurance policy”
Some people buy life insurance in the name of their spouse or children. Life expectancy among women is higher and mortality charges for children are lower, and this tempts individuals to choose this option. The premium amount may be significantly lower than what they would pay for their own insurance coverage but as the primary bread earner, not having this coverage for self is risky. In the event of the premature demise of the person, the family is left with no financial support. So it is worth it to get personal insurance cover at a little more premium and enjoy peace of mind.
People refrain from getting life coverage because of the high premium cost. They also assume that the returns on this are low. But who wants to jeopardize the financial security of their family, if, heaven forbid, there is an accident? The right life plan is essential and there’s no greater peace than knowing that one’s family is well taken care of financially, especially when they are already dealing with the grief of losing their loved one.
Do you have life insurance cover?
If not, why not?
I also have some interesting information on why you should not use health insurance only as a tax saving tool that I’ll share in a couple of days!