It is often a question that affluent clients ask – DO I NEED INSURANCE? Insurance is a risk mitigation or transfer mechanism. It simply means if an unforeseeable event happens (death, incapacitation, etc), the financial burden that the family will undergo can be taken care of by getting insurance claims. But what if a person does not foresee or recognize a future risk on income?
The media has popularized that if you have liabilities, you should take a term plan… but what if a person is not married & does not plan to start a family?
Sometimes an investor’s net worth has exceeded his future requirements. Should he/she need insurance?
By insurance, we mean the personal insurance taken on the individual life of the breadwinner.
We will take these equations today.
DO I NEED INSURANCE?
Q 1. I earn well and save enough. Why do I need insurance?
Ans 1. Life is unpredictable and insurance is the simplest way to cope with the unforeseen and unexpected. It is the best backup that you or your dependents can rely on when risk becomes a reality and results in loss of life or property. Earning can get stopped or disturbed. Finances can get locked. So insurance is the way to deal with the unpredictability of life.
Q 2. I am young, fit and healthy. Why do I need insurance?
Ans 2. Covid is one time when we saw deaths at such alarming rates. Most of these people we assumed or proclaimed – Healthy. Health is an issue that is dynamic. Assuming you are or will always be healthy is generous thinking. Plan well and start early. That’s the best way to make insurance work for you. Premiums will be low, processing will be minimal and a long-term financial cover is in place to take care of later years.
Q 3. I have no loans or liabilities. Why do I need insurance?
Ans 3. Loans are not the only contingency of life. Dependents need funds for a future they themselves did not know about. Insurance is a contingency plan to take care of uncertainties. It is a way of providing for your dependents and ensuring continuity of their material needs and wants in your unfortunate absence. It is a way to plan and ensure a regular income whenever you decide to retire.
Que. Isn’t insurance an unnecessary cost and expense?
Ans. You have to change the way you think. You drive left to avoid injuries & accidents. You take vitamins to beat the unknown illness. You invest in SIP for Retirement. Insurance is a responsibility. It ensures security and mitigates risk. It is an assurance to your dependents that you care. Insurance is also an investment tool and provides tax benefits too. Most of all, insurance is peace of mind. The price of getting insured is negligible compared to the value that insurance delivers.
