The other day, I was talking to a friend of mine, Sunil (name changed), when he told me that he is looking for a good life insurance policy for his father, who is 65 years old. Sunil also said that most of the policies do not cover his father and others demanded a very high premium. Being a person closely associated with the financial industry, I knew that this would be obvious and told him so. And then I asked him, “why do you want to buy a life insurance for your father?” To my great surprise, his answer was, “Because I want my Father to live upto the age of 100 years”. Noble thought, indeed, probably we all would want our parents to live upto that age. But the question is how a life insurance policy would ensure that he lives upto 100 years?

Another story, one more friend of mine, Deepak (name changed) was worried as his wife Roshni, who is a homemaker, wanted him to buy a life insurance policy for her. Deepak was aware that taking life insurance on a non-earning member is not a wise decision. But Roshni insisted that, If Deepak loves her, he should buy a life insurance policy for her. If he doesn’t, it means it does not matter for Deepak, whether Roshni is there or not. Again, the question that remains unanswered is, how can a  life insurance policy save your life ?? How can it ensure that you live long ?

Do we really understand it ?

From the above two stories, I could conclude that most of us don’t really understand the meaning of risk and the meaning of insurance. We think that an insurance cover would act like some “Protective Shield” (Don’t know if this word coincides with some insurance policy name) around us which would save us from death.

The Possible Culprit !!

When I tried to track back, I came across a few TV commercials, who have mis-communicated the meaning of life insurance to the audience. For example, there was an ad on TV, wherein an animated character is being chased by a tiger. While running, the character pulls out a laptop from his bag, fiddles with a few keys and his life insurance premium is paid. He turns back and shows the e-receipt to the tiger, and the tiger turns back.

Now, although it might be a good ad to watch for entertainment purpose (because of the happy ending), this is not the meaning of life insurance. If sometimes we are really trapped in a life threatening situation, we cannot relax just because we have a life insurance. Our life insurance policy just means that, it will provide “X” amount to our family, in case something was to happen to us. But, you would agree with me on this one, our family would be much better-off with we being there, than the insurance amount.

In a Nutshell..

So for both, Sunil and Deepak, it is advisable to take a health insurance (rather than a life insurance) for their father and wife respectively, so that in case of some health problem, they do not have to halt the treatment because of finances. This, in a way, could result in a longer life for them. Again, this does not mean that by taking health insurance, it will be ensured that they will have a good health. They would still be required to take good care of their health.  “Insurance” would just protect them against financial losses in case of an unforeseen event.

Also, when it comes to buying life insurance, it should always be taken for the earning member of the family. And that too, a term insurance, so that a higher cover can be taken a low premium and the family is well protected against the risk of an untimely demise of the earning member.

We look forward to your feedback and comments on the above article. Please feel free to contact us on saurabh.nidhiinvestments@gmail.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. Readers are advised to use their own judgement and consult their financial advisor before taking any financial decisions)

 

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18 Comments

  1. Well explained the purpose of life inssurance. And yes people take not only ulip but endowment policies as investment/savings. My father took policy for my mother just as forceful saving. This is actually almost equally wrong as ulip.

    1. Thank you so much for your valuable comments Sir.

      It is so very true that people buy insurance as an instrument for investments. But this is equally true, that for mixing insurance with investment, insurance industry (Companies and Agents) both are also equally responsible, if not more.

      In fact, Mr. J Hari Narayan (Chairman, IRDA) has himself admitted recently that “The Insurance Industry has made a mistake in marketing insurance as investment. It is a risk product.” (http://www.moneylife.in/article/76/8810.html)

      Ideally, he should have come up with this statement long back. Nevertheless, better late than never.

      Hope that slowly but steadily people start understanding the meaning of risk and buy insurance for the right reasons.

      Thanks again for your visit and feedback. Looking forward to more.

      Regards

  2. What Timing !!

    Even I was forcing my husband to buy a life insurance for me (from my friend) as she is a good friend of mine.

    But your article has come as a perfect eye opener, that too at the right time.

    Can you write some article on health insurance specifically related to women looking for maternity benefits ??

    1. Thanks for your feedback Navnidhi.

      Even I am happy that you got the right info at the right time. You may also want to give this feedback to your friend that she should stop insisting you for a life insurance.

      Regarding your suggestion for health insurance, really thankful for the same. I will make it a point to write bout the same in near future.

  3. Nice one Sirjee. You are really creating awareness among people through your series of blogs. Keep it up, Nice one :).

    Regards,
    Rashmi Agrawal

  4. I have a slightly differing opinion, not in terms of what life-insurance means but for whom should it be purchased. Certainly it does not make sense to buy a life-insurance for a parent aged 65+

    Life insurance is a way to protect your family financially in case of a sad demise. That demise could be of an earning or a non-earning member. A homemaker works as hard, rather more than the bread-earner of the house. For a moment imagine a life without her, and what it would mean financially. Depending on where you live, taking care of kids could be an expensive business. Moreover, with a void in the family, the earning-member of the family would have to spend more time at home with kids resulting in rightful and justified compromises at work, hurting his growth potential. If it were me, I would want to give up a high profile career and settle down for less, and a life insurance drawn on a non-earning member of the family could fill that gap without having to make too many life changing financial compromises.

    just a thought…

    1. Very Noble Thought Sir. (Sorry I couldnt find your name in the post)

      Though not trying to argue with you, but will just try to put my views across. First thing is, my main focus was on the reason for buying insurance. Even if insurance is to be bought for a non-earning member, it should not be bought with a belief that it, in some way, could contribute towards longevity of life for that person (which is a belief in most cases).

      Secondly, the way you have imagined one situation of life, lets try and imagine other. The husband buys an insurance for himself as well as his homemaker wife, and unfortunately the husband passes away. Now, from the insurance proceeds, the wife has to run the family, take care of the kids etc which itself would be a tough job. Imagine if she also has to pay premium towards the life cover policy purchased for her, how is she going to manage the same ? But there is a solution to this. If at all (depending on situation) there needs to be a life cover policy for a homemaker wife, it could be Single payment term plan, so that even if the husband is not there, she does not have to pay the premium and is still covered.

      Lastly, I would again like to thank you for a very noble perspective. Please do keep visiting this space and keep contributing your valuable comments.

      Regards

  5. Sir jee…. sirf ek hi word h bacha h mere paas kahne or likhne k liye..

    “JABARDAST”

    Ek request or thi bhai g…. aajkal articles ki posting thodi slow ho rahi h or aapse expactions minimum one per week to ho hi gayi h sir g….

    but as usual your other aricle this is also eye opener….

    Thanks for making awarness….

    1. Thank you very much for your kind words Bhai ji.

      Your request is much more than a compliment to me. Sorry for not being able to post any article in August.

      Will try and maintain a frequency of 2 articles a month. God willing, the frequency might also increased to an article a week.

      Thanks again for your valuable feedback. Looking forward to such great support ongoing in future.

  6. Amazing Article !!

    The best part about your articles is the “Out of the box” thinking.

    Or we can say, different from a routine article on insurance.

    Also, there is an advertisement on “Safe Water Insurance” which highlights insurance in such a manner as if it is some tool to protect somebody’s life.

    Thanks and COngrats for another gr8 article. Keep writing !!

    Karan

    1. Thanks for your Feedback Karan.

      Yes indeed the advertisement industry has contributed to a great extent to mis-communicate the meaning of insurance to the audience. People who are not too “Finance Savvy” tend to believe what is communicated to them by the media. So it needs to assume higher responsibility and act accordingly.

      Regards
      Prof. Bajaj

    1. Very True Lalitji !!

      We can just make someone aware not to jump in the well. But if people has decided there destiny, then only God can save them !!

      Thanks for your visit and valuable comments. Looking forward to more.

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