Purchasing a life insurance is a must for all individuals. However as per the Indian Insurance and Statistics Handbook (2016-17, data released by IRDAI) 75% of Indians have no life insurance policy. Well, irrespective of the amount you earn, there is simply no one who can predict future events. Several individuals expire prematurely every year owing to accident, illness and other tragedies. And if you are one of those who is the sole earner in the family, who happens to meet an unexpected end, it can have a morbid consequence on your dependents, not just emotionally but also financially.
Before we list in detail the consequences of not buying a life insurance, let us precisely discuss – what is life insurance.
Life insurance is a contract between the insurance company and policy holder, wherein the insurance company/insurer promises to provide a predetermined big-ticket amount in exchange for premium upon the demise of the insured.
However, note that, life insurance policy these days not just offer death benefits, some may even provide maturity benefits clubbed with life insurance cover. ULIPs or Unit Linked Plan is one such insurance scheme, which is a melded product combining life insurance and market linked investments. It comes with a lock in period of 5 years and is designed to provide both life security and long term returns to meet your crucial financial goals.
Here are some of the consequences of not opting for a life insurance plan:
You leave your dependents with no financial assistance to meet their monthly mandatory expenses
One of the biggest consequences of not holding a life insurance is borne by your dependents. Misfortunate events like life threatening diseases, road accidents etc are uncertain in nature and can strike any time. And if you are the only earning member in your family with no life insurance cover then your family may face acute financial distress in your absence. Holding a life insurance cover is the only solution as it provides a sum assured on your demise, which can make the life of your dependents easier.
You leave your dependents with no monetary help to meet your debts
Number of debts in the form of car loan, home loan, personal loan etc can further shatter your already mourning family. As proceeds from life insurance can assist your dependents repay your loans along with interest, opting for such covers removes the burden of your borrowings from falling on your dependents.
You leave your dependents with an unsecured financial future
Each earning family member has certain obligations and responsibilities towards their parents, spouse and kids. Your sudden demise can stop you from meeting such obligations. With insurance plan, one can plan their future accordingly. On your demise, the payment of the sum assured by the insurance company ensures uninterrupted higher education of wards, post retirement security of your spouse etc.
You become financially dependent on others after your retirement
Your post retirement life cannot be termed as a proverbial golden period if you lack financial independence. One of the best ways to secure your retired life is by opting for life insurance that would meet all your post retirement expenses. Opting for such covers can benefit you in 2 ways i.e provide a steady monetary flow and offer financial help to all your dependents in your absence.
You miss out on tax benefits
Not purchasing life insurance policies prevents one from availing tax benefits. Note that premium paid on life insurance schemes such as money back, endowment, term insurance and ULIPs policies qualify for tax deduction of up to Rs 1.50 lakh as per Section 80 C. According to Section 10 (10D), the sum assured received on the maturity/death of the life assured is tax free.
Bottom line
In the insurance sector today, there are different types of insurance schemes namely term plans, ULIPs, money back, endowment schemes etc. Thus, before purchasing, ensure to compare among different plans to opt for the one as per your preference. Once you have decided your scheme, ensure to use life insurance premium calculator to check your monthly/annual premiums. Life insurance premium calculator even allows you to simultaneously compare premiums that you would pay for different insurance companies.