It has become an obligatory custom in India for every individual to invest in a life insurance policy as soon as they start earning. This is because many citizens of our country have adapted life insurance as a necessity and view life insurance plans as a paramount purchase. However, this frame of mind finds its grounds from the mistaken and false understanding of the term life insurance.
Let’s begin with understanding the correct Life Insurance Meaning and Importance of it.
Life Insurance is simply a contract between an insurance policy holder and the insurer which assures that a sum amount would be paid to the dependent family members of the insured in case of an unfortunate circumstance of his/her death to compensate the sufferers for the loss of income.
Therefore, benefits of life insurance are directly headed towards indemnifying for the death of the breadwinner of the family and not to upgrade or augment it. Consequently, purchasing a life insurance plan is not needed by everybody.
Given below are the types of individuals who absolutely do not require to buy a life insurance plan:
1. Non-Wage Earners may not need life insurance
Individuals like students, drop-outs or a person who has recently planned to switch their career paths do not vitalize the need to acquire any sort of life insurance products, considering that life insurance policies tend to compensate for the financial loss suffered by the dependents on you and it works to make sure that they do not experience a financial strain in case of your untimely death.
Although, the occurrence of your demise is going to be unquestionably mournful and disconsolating for them but a sum of mere funds disbursed by an insurance company would definitely not be able to make up for their emotional suffering and trauma.
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Henceforth, you don’t need to buy a life insurance policy if you are a non-wage earner having no individual dependent on you for money and forthwith, not contributing to the financial balance of the family in any manner.
Relating to it, many insurance companies do not even offer any life insurance schemes for the lady of the house as her death might blow a huge emotional impact on the family members but an insurance amount definitely cannot substitute for their loss.
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Addingly, please be acquainted with the fact that as a parent, you do not need life insurance types like traditional plans that offer inbuilt umbrella coverage for young reliants like children because a monetary support would not do any good against the death of your child.
2. Free of Dependent’s Liabilities
Many people presume life insurance as an investment plan and tend to omit one of the most significant elements of a Life Insurance Policy, i.e., the amount generated from it does not come to them but is meant to be provided to the beneficiaries elected by the individual. Therefore, you do not need to purchase a life insurance if you don’t have any financial liabilities of the dependents.
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For instance, a working individual who is still unmarried or is married but does not have children and whose partner or family members are self-sufficient and not reliant on him/her for their financial expenses do not really need to invest in a life insurance policy.
Similarly, individuals above 50 years of age who already have investments for themselves and for their partner’s retirement life, have fulfilled goals like having a home and whose kids are financially independent also do not need to invest in a life insurance.
However, a life cover might be needed in case such an individual pertains to any financial debts which are to be repaid. In such cases of death of the insured, the monetary support provided by the insurer can be used to repay the loan, henceforth, relieving the family members from experiencing any heavy financial strain.
3. Pensioner or Retired Individuals
A person heading towards retirement can live a financially delighted life without having to buy a life insurance cover in case if they already have retirement benefits coming in from their investments. Saying that, many insurance companies either do not even offer life coverage to individuals above the age of 60 or impose almost 4-6 times more premiums as compared to that taken in your twenties.
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The idea of acquiring a life insurance plan at an advanced stage of career basically originated from the ground thought of supporting a partner or dependent family members via the insurance benefit amount in case of their own death.
However, it is strongly recommended to not do so as purchasing a life cover after reaching 50s or 60s of age thrusts heavy annual premiums because in such situations, the insurers are well informed of increased mortality rates during this age.
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For instance, let’s understand this with an example of ICICI Prudential Life Insurance. If a male individual’s age is between 25-35 years and he opts for a life coverage, the annual premium charged on him would range between 11,300 to 18,300 respectively. However, if a man of say, 60 years applies for the same life insurance, the premiums implied on his policy would be around Rs. 95,000.
Hence, it is essential to verify the implication of financial tension these heavy amounts of premiums are going to form in your pocket if you live longer before planning to invest in a life insurance for the sake of benefiting your family members with an estimated amount during an unfortunate case of your demise.
Having said so, putting your money in an avenue programme like mutual funds or bonds is a rather fruitful idea if you wish to leave a financial reserve for your family.
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4. Adequate Financial Status
If an individual has sustained an ample amount of bank balance to comfortably reside through their retirement period, such people also do not require the support of a life insurance plan.
To comprehend better, let’s say if your assets minus liabilities run in crores, it is evident that the financial expenses of the reliants on you will adequately be taken care of through the annual earnings from these assets, in the circumstance of your death. Therefore, it is not advisable to invest in an insurance premium as the requirements and expenses for your family members will duly be met.
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However, some such high net-worth individuals (HNIs) still purchase heavy insurance coverage to avail great tax benefits by taking use of a life insurance policy for estate planning as otherwise, heavy taxes are imposed on imparting wealth amongst different generations in the Western world.
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This ascertains that the dependents of HNI keep benefiting from his/her wealth, even after their demise. Although, as of now, there is no such estate duty implied in India.
Concluding, if you are interested in buying life coverage, it is crucial and highly advisable to research about your financial needs and requirements along with reading about what is Life Insurance and how does it work, and if it is really necessitous for you to invest in one.
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Life Insurance FAQs
What is Life insurance
A contract provided by the insurance company to the policyholder which guarantees about securing the death risk of the insured person in exchange of premium payments deposited by the policyholder is called as Life insurance.
The coverage continues for a term which you choose.
In case of death or maturity, the promised benefits would be paid by the insurance company to fulfil its end of the contract.
Therefore, a life insurance policy is a way to pass on the burden of financial strain occurence towards the insurance company in case of a premature death of the insured.
What KYC documents are required for buying a life insurance policy online?
To get your life insurance policy issued while purchasing it online, it is necessary to deposit your KYC (Know Your Customer) documents to the insurance company.
A valid identity proof like Aadhaar card, Voter ID card, passport, PAN Card, etc., an authentic address proof like Aadhaar card, Voter ID card, rent agreement, property deed, utility bills, etc. and your photographs are the documentation involved for KYC.
How do I surrender my life insurance policy?
It is possible only after the fulfilment of predetermined number of policy years to waive off your life insurance policy. Hence, to do so, you should first find out if the policy has achieved a surrender value.
If yes, you can surrender the plan by writing a formal application to your insurance company.
Leadingly, you are required to fill up a form with accurate details for surrender of the policy and submit it to initiate the process at the earliest.
After verification, your policy would get concluded and a surrender amount would be paid to you by your insurance provider.
What is the difference between policyholder and life assured?
The owner of the policy who is liable to pay the premium of the life insurance policy is known as the Policyholder.
Whereas, Life assured is a term for an individual whose death risk is insured under the policy.
The death benefit on death of the assured is paid in a situation if the policyholder and the life assured are different under a life insurance policy, Although, no benefit would be paid in case if a policyholder dies.