Getting a term life insurance is one of the initial steps towards planning your financial life well. And rightly so. A good insurance cover can help manage financial risk that your family can potentially face in case of a breadwinner’s death. In case of death of the insured person, the family is paid a certain amount (sum insured) by the insurer. In return, the person buying the insurance policy has to pay a certain fee to the insurer – called premium.
Counter intuitive it may seem, but life insurance is not sacrosanct. It is not always necessary to have a life insurance cover. Here are few situations, where buying a life insurance policy may not make sense.
Cases where buying life insurance doesn’t make sense
1 – You don’t have dependents
The primary purpose of term life insurance is to manage financial risk to dependents in case of death. However if you don’t have dependents, the purpose is lost. Some of the possible cases can be:
- Single person with no dependents
- You are married (but don’t plan to / can’t have children) and the spouse is self sufficient in terms of finances
- You have kids who are grown up and are no longer financially dependent upon you.
2 – You have enough assets which can take care of your family
If you have enough assets or are financially independent, the likelihood is that your assets will take care of your family’s need in case of your death. While the insurance amount can augment this money, it really doesn’t serve much purpose if all your family needs are anyway taken care of!
IF you have, say Rs. 10 Crore as liquid assets and your family needs are like Rs. 1 Lac a month (including saving for major life goals), then there is not much additional benefit a term insurance cover can provide!
3 – You are planning to lie about or hide certain details
If you are planning to hide certain details like – health history or habits like smoking etc. from your insurer, then there is a good likelihood of your claim getting rejected when need be.
Insurance companies do fair bit of due diligence and sleuthing before releasing a claim. Better to be on the right side of truth!
4 – When you are buying insurance for investment
Insurance is not an investment. If you are thinking of insurance as an investment – you are doing injustice to both. The insurance cover you get in a mishmash insurance + investment product is small. Is is unlikely that it will be sufficient for your family, unless you are extremely rich to begin with!
While some money is better than nothing, this money is likely to be too small to make much difference (more s, given the cost of buying such insurance!)
There are many more reasons you can hear, like – I am in a good health, I won’t die soon, my company will take care of it and so on. However, most of these arguments don’t hold true given the uncertain nature of life & an almost certain nature of your expenses. It’s better to give a serious thought to need for insurance and decide for yourself whether you need insurance (and how much) or not. In most of the cases, you probably would need it.