Is Insurance required ?
Human nature is whatever is mandatory by law we go for it and what is not we think twice and raise questions. Everyone goes for insurance of vehicle assuming it is one of the mandatory requirements when we buy a car. What is it really for ? Yes we all know, if there is some damage, the insurance company will reimburse and we pay premium to cover that one day risk which may occur. Same goes for your home insurance as you may use it for any accident at home – you don’t want to be on the roads if your house is burgled or on fire. I need not spend much time on insurance of a vehicle as most of us have some awareness about it.
And Life ?
What happens in case you are hit by a bus tomorrow ? Are you the primary earning person and will the earning stop for family? If you have a house loan or mortgage, how will the monthly mortgage paid and will your family have to suffer ? And what if just like your car you also have insurance say about 500 thousand and when you die, your family gets 500 thousand ? Your family will be much better off than if you don’t leave anything. But choice is yours – you may or may not insure. The downside is same like a vehicle that you have to pay a premium to insurance company. So when everything is good we don’t care but when things go wrong, you don’t have time to plan !
What if you live long ?
A friend of mine argued, what if I live long say 75 or 80 years, will I get back the money ? Here comes the choice –
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- Do you want a return (by the way you cannot get in vehicle or home insurance ) ?
- Do you just want a decent insurance and do not want any return if you live ?
Lets consider it one by one:
Life insurance with returns
If you want return, obviously you will have to pay more premium for the same benefit because insurance company is insuring you as well as giving you money back if you live pass the term specified. This option is not bad if you are not good with handling money and are pessimistic about saving. So you pay more today, if you die early your family gets the insured amount (e.g. 500 thousand) and if you live pass the term, you get your premium or more benefits as return. Basically these insurance companies will invest your money(as these policies are costlier) and get returns at the end of term and after keeping a cut will give you the money in return.
Term Life insurance
Option (ii) is a pure Life Insurance like the one of your car where you are just securing risk and not expecting return. The premium you pay in this case will be less as you are not getting the return money. I personally prefer this insurance as the difference of paying more to get return if I survive, I will save today and invest somewhere else. Again, it is your personal choice and depends upon your circumstances.
You can compare different insurance companies and look at benefits and approximate fee. Remember, do your homework !!
Points to remember / consider:
Getting Life insurance is costlier if:
- You are a smoker
- Have suffered some disease and are under medication
- Have family history of disease like heart disease, diabetes, etc.
- Job (active, has risk involved, sedentary)
- Gender
- Your age ( insurance becomes costly with age)
*Do not lie about your any of your diseases or medical condition, if you die and it is reported or diagnosed that you had such conditions and did not inform the company, all the premium is gone waste as there will be no payout to the family
* It is recommended to go for insurance which requires proper medical checkup.