Life insurance - Why Not Many Buy Them?

There are several myths regarding purchasing of life insurance policies. The issue with investors in the country is that most believe they have done enough to be financially secure. There are several others who strongly believe that they are in the right direction of achieving financial independence even after retirement. Life insurance plans as most of us know, lays down the foundation to financial long term savings as well as promotes protection of family members.

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Individuals have a certain myth about life insurance and these are the very roadblocks you need to get rid off, if you want to invest right.

Another common scenario that we come across is that most people’s acquaintance with life insurance is when friends or any family member acquires their insurance license. If this is one reason you’ve bought your insurance policy, then it is because you are ill informed of its benefits and are only doing your licensed insurance agent a favour. You go through the inconvenience of living with it, not knowing and not willing to know if it’s the right insurance policy for you.

Unlike popular myths there are millions of reasons why you need to buy a good life insurance policy. Long term financial plan and life protection against any adversity that you and your family could face; being the most important ones.

Here are some of the reasons why people do not buy life insurance. We advise you not to think like them, make the right decision for your family and your future.

Expensive

It goes without saying that premium payments for life insurances is not affordable by many. This is possibly one of the reasons why most people stray away from buying a good life insurance policy. The fact however is that not all life insurance policies are expensive, there are several that are affordable and are suited to meet every type of investors budget. These affordable life policies will also give you coverage of a considerate amount.

No Responsibility Factor

People in the age group of 22-30 years, living in their parents home and earning a decent amount, believe that there is no reason for them to hold a life insurance policy. In such scenarios the parents are still earning, although close to retirement. What working youngsters need to realise is that their parents will soon retire, and the onus of supporting them financially will eventually fall on their shoulders.

Also life is unpredictable, even young people face early death or are disabled for life. A life insurance in such case will always help family members meet their financial requirement. Buying a life insurance in your early years will eventually help you to learn the art of saving. Don’t forget, that compound interest will also work in your favour.

Happy with Employer Given Life Cover

As an employee of a company or owner of a credit card there are times you might receive a group life cover. Unfortunately, this is not enough for you and you certainly cannot depend entirely on it. Your life insurance policy should be 10 times more than your annual income. In a group cover you are generally not covered for enough, also when you switch jobs there is a time frame when you are not covered. This puts you and your family through a lot of risk.

Covers received because you own a credit card or any other financial tool, will not give you enough coverage in case of natural death, since these are generally accident life covers.

Life Insurance in Your Spouse/Child's Name

Most life insurance agents in order to sell you a policy often glorify buying a life insurance in your child’s or wife’s name. Since women have a higher life expectancy and mortality charges for your young children are much lower, you fall into a trap. The premiums payments are much cheaper than it would be if you were the policy holder. But, you as a sole breadwinner are bereft of any protection, which is really not right. In case the bread winner dies, the family does not receive any financial support. It is wise therefore to act practically and choose a life insurance that will help you in the long run rather than save you a few hundreds in your premium payments.

Nothing in Returns

Another reason why people shy away from purchasing a life insurance policy is that they believe they do not receive any maturity benefit in return. The flip side is that life policies not only offer complete cover to you and your family, but also ensure that your family is financially independent after your death.

˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-04-2025

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).

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