Young people think life insurance is something you need to think about when you get old. But that is a big myth!
Buying life insurance is one of the most important financial decisions, but believe it or not, only 10 per cent of Indians are insured. But why is it so important? Well, regardless of how much you earn, no one knows what the future holds. Lots of people die a prematurely every year from illness or accident and, if you happen to be the sole breadwinner in the family and you were to pass away, it could have devastating consequences for your loved ones-their ability to pay household expenses, debts and maintain their standard of living.
The least you can do, therefore, is to secure your family's financial future by buying a life insurance policy. Besides, do not overlook benefits of a life insurance during your lifetime, especially if you are young. We list 10 compelling reasons for buying a life insurance policy.
1. LOOKING AFTER YOUR LOVED ONES EVEN AFTER YOU'RE GONE: This is the most important aspect of life insurance that one needs to factor in. Your family is dependent on you even after you're gone and you certainly don't want to let them down. Whether it's for replacing lost income, paying for your child's education or making sure your spouse get the much-needed financial security, life insurance could save the day for your surviving dependents.
2. DEALING WITH DEBT: You don't want your family to deal with financial liabilities during a crisis. Any outstanding debt-a home loan, auto loan, personal loan, or a loan on credit cards will be taken care of if you happen to buy the right life insurance policy.
3. HELPS ACHIEVE LONG-TERM GOALS: Since it is an instrument that keeps you invested for the long term, it would help you achieve your long-term goals such as buying a home or planning your retirement. It also provides you with diverse investment options that come along with different types of policies.
Some policies are tied to certain investment products that pay dividends based on their performance. If you are opting for an investment-linked policy, be sure to read the fine print to be fully aware of the potential risks and returns.
4. LIFE INSURANCE SUPPLEMENTS YOUR RETIREMENT GOALS: Who wouldn't like their retirement savings to last until they do? With a life insurance plan, you can ensure you have a regular stream of income every month. Putting money in an annuity is like a pension plan- put in some money regularly in a life insurance product and enjoy a steady income every month even after retirement.
5. BUYING INSURANCE IS CHEAPER WHEN YOU'RE YOUNGER: Not every millennial needs a life insurance policy. If you haven't created an emergency fund or you're still living off your parents' money, insurance shouldn't be a priority.
However, if you do have dependents or you have co-signed a loan with your parents (or any other member of your family or friend), whether it be a student loan or a home loan, you need to start considering buying a life insurance policy. Besides, coverage costs are much lower when you're single. Insurance agents may try to sell you a policy that you might not need.
Therefore, do your due diligence or approach a financial planner to determine how much insurance you need considering the other assets you may own. Even if you're single, there may be other dependents and you need to ensure they're taken care of. "The earlier the better. For instance, single people provide financial support for ageing parents or a sibling with special needs. Insurability is another reason to consider life insurance when you're single. If you're young, healthy and have a good family health history, your insurability is at its peak, and you can get the best rates on your life insurance policy."
6. YOUR BUSINESS IS ALSO TAKEN CARE OF: Life insurance isn't only for yourself and your family. Some insurance policies also take care of your business. If you own a business, then your business partner can purchase your portion of the business without hassle. Your business partner( s) will enter a buy-sell agreement and the payout would go to the deceased partner's nominees, but without giving them a stake in the company. There are two types of life insurance policies-a term insurance policy and a life insurance policy.
While we are all aware of the death benefits these insurance policies provide, we know little about the various options they layout that could help strengthen your financial position.
A term insurance provides protection for a specified period of time (10, 20 or 30 years) and pays out the benefits only if you die during the term. The policy will expire and coverage will end if you outlive your policy. An investment-cum-protection plan on the other hand offers you a lump sum amount on the completion of the term of the policy. These plans also offer you protection but the cover is usually not as high as offered with term plans.
7. TAX-SAVING PURPOSES: You could save taxes with insurance policies irrespective of what plan you buy. The premium you pay on an insurance policy is eligible for a maximum tax benefit of Rs 1.5 lakh under Section 80C, and for tax-free proceeds on death/maturity under Section 10 (D) of the Income Tax Act, 1961.
8. A TOOL FOR FORCED SAVINGS: If you choose a traditional or unit-linked policy, you pay a premium each month, which is higher than what it costs to insure you. This bit of extra money is invested and it accrues cash value. This cash can then be borrowed against the policy or you can choose to sell it or draw income from it.
9. YOU MAY NOT BE QUALIFIED FOR IT LATER: Life insurance policies run on uncertainties. You may be healthy now and paying a premium for life insurance may seem to be an added financial burden, but if you suddenly fall ill, you may not be allowed to but a life insurance policy. Therefore, it is imperative to buy one early on in your life because it remains in force if your health deteriorates later on. Insurance companies allow you to attach certain riders or benefits to your existing or new policy.
These riders enhance the quality of your insurance. The accelerated death benefit rider, for instance, allows the policy owner to avail all or a part of the policy's death benefit if he or she has less time to live due to a critical illness, or wants to use the money for medical treatment or related expenses.
10. PEACE OF MIND: Death is unavoidable. In the face of tragedy, the least you can do for your family is to secure their financial future. Even if it is a small policy, you know that you've done all you can to help them tide over difficult times.
Buying life insurance is one of the most important financial decisions, but believe it or not, only 10 per cent of Indians are insured. But why is it so important? Well, regardless of how much you earn, no one knows what the future holds. Lots of people die a prematurely every year from illness or accident and, if you happen to be the sole breadwinner in the family and you were to pass away, it could have devastating consequences for your loved ones-their ability to pay household expenses, debts and maintain their standard of living.
The least you can do, therefore, is to secure your family's financial future by buying a life insurance policy. Besides, do not overlook benefits of a life insurance during your lifetime, especially if you are young. We list 10 compelling reasons for buying a life insurance policy.
1. LOOKING AFTER YOUR LOVED ONES EVEN AFTER YOU'RE GONE: This is the most important aspect of life insurance that one needs to factor in. Your family is dependent on you even after you're gone and you certainly don't want to let them down. Whether it's for replacing lost income, paying for your child's education or making sure your spouse get the much-needed financial security, life insurance could save the day for your surviving dependents.
2. DEALING WITH DEBT: You don't want your family to deal with financial liabilities during a crisis. Any outstanding debt-a home loan, auto loan, personal loan, or a loan on credit cards will be taken care of if you happen to buy the right life insurance policy.
3. HELPS ACHIEVE LONG-TERM GOALS: Since it is an instrument that keeps you invested for the long term, it would help you achieve your long-term goals such as buying a home or planning your retirement. It also provides you with diverse investment options that come along with different types of policies.
Some policies are tied to certain investment products that pay dividends based on their performance. If you are opting for an investment-linked policy, be sure to read the fine print to be fully aware of the potential risks and returns.
4. LIFE INSURANCE SUPPLEMENTS YOUR RETIREMENT GOALS: Who wouldn't like their retirement savings to last until they do? With a life insurance plan, you can ensure you have a regular stream of income every month. Putting money in an annuity is like a pension plan- put in some money regularly in a life insurance product and enjoy a steady income every month even after retirement.
5. BUYING INSURANCE IS CHEAPER WHEN YOU'RE YOUNGER: Not every millennial needs a life insurance policy. If you haven't created an emergency fund or you're still living off your parents' money, insurance shouldn't be a priority.
However, if you do have dependents or you have co-signed a loan with your parents (or any other member of your family or friend), whether it be a student loan or a home loan, you need to start considering buying a life insurance policy. Besides, coverage costs are much lower when you're single. Insurance agents may try to sell you a policy that you might not need.
Therefore, do your due diligence or approach a financial planner to determine how much insurance you need considering the other assets you may own. Even if you're single, there may be other dependents and you need to ensure they're taken care of. "The earlier the better. For instance, single people provide financial support for ageing parents or a sibling with special needs. Insurability is another reason to consider life insurance when you're single. If you're young, healthy and have a good family health history, your insurability is at its peak, and you can get the best rates on your life insurance policy."
6. YOUR BUSINESS IS ALSO TAKEN CARE OF: Life insurance isn't only for yourself and your family. Some insurance policies also take care of your business. If you own a business, then your business partner can purchase your portion of the business without hassle. Your business partner( s) will enter a buy-sell agreement and the payout would go to the deceased partner's nominees, but without giving them a stake in the company. There are two types of life insurance policies-a term insurance policy and a life insurance policy.
While we are all aware of the death benefits these insurance policies provide, we know little about the various options they layout that could help strengthen your financial position.
A term insurance provides protection for a specified period of time (10, 20 or 30 years) and pays out the benefits only if you die during the term. The policy will expire and coverage will end if you outlive your policy. An investment-cum-protection plan on the other hand offers you a lump sum amount on the completion of the term of the policy. These plans also offer you protection but the cover is usually not as high as offered with term plans.
7. TAX-SAVING PURPOSES: You could save taxes with insurance policies irrespective of what plan you buy. The premium you pay on an insurance policy is eligible for a maximum tax benefit of Rs 1.5 lakh under Section 80C, and for tax-free proceeds on death/maturity under Section 10 (D) of the Income Tax Act, 1961.
8. A TOOL FOR FORCED SAVINGS: If you choose a traditional or unit-linked policy, you pay a premium each month, which is higher than what it costs to insure you. This bit of extra money is invested and it accrues cash value. This cash can then be borrowed against the policy or you can choose to sell it or draw income from it.
9. YOU MAY NOT BE QUALIFIED FOR IT LATER: Life insurance policies run on uncertainties. You may be healthy now and paying a premium for life insurance may seem to be an added financial burden, but if you suddenly fall ill, you may not be allowed to but a life insurance policy. Therefore, it is imperative to buy one early on in your life because it remains in force if your health deteriorates later on. Insurance companies allow you to attach certain riders or benefits to your existing or new policy.
These riders enhance the quality of your insurance. The accelerated death benefit rider, for instance, allows the policy owner to avail all or a part of the policy's death benefit if he or she has less time to live due to a critical illness, or wants to use the money for medical treatment or related expenses.
10. PEACE OF MIND: Death is unavoidable. In the face of tragedy, the least you can do for your family is to secure their financial future. Even if it is a small policy, you know that you've done all you can to help them tide over difficult times.
"Life insurance is a great tool for both protection as well as helping a consumer save in a disciplined manner, which leads to creation of a good corpus. The need for life insurance changes at different stages of your life-cycle depending on the financial obligations and dependencies."
Source: Business Today
Why People Don't Buy Life Insurance
Other Financial Priorities
With high unemployment rates, reduced household income and daily living expenses on the rise, a lot of people feel the need to postpone making any additional financial decisions. Unfortunately, this means they’ll probably put off buying life insurance. Budgeting under difficult financial conditions can be hard and many people just don’t know how they’ll fit the cost of insurance into their budget that is already stretched thin. As a life insurance agent, it’s your job to help someone understand the importance of life insurance and how they can budget for it. However, financial concerns aren’t the most common reason why people don’t buy life insurance.
With high unemployment rates, reduced household income and daily living expenses on the rise, a lot of people feel the need to postpone making any additional financial decisions. Unfortunately, this means they’ll probably put off buying life insurance. Budgeting under difficult financial conditions can be hard and many people just don’t know how they’ll fit the cost of insurance into their budget that is already stretched thin. As a life insurance agent, it’s your job to help someone understand the importance of life insurance and how they can budget for it. However, financial concerns aren’t the most common reason why people don’t buy life insurance.
Lack of Knowledge
Most people who choose not to buy life insurance don’t buy it because they don’t understand it. They don’t have a clear understanding of what type of coverage they should buy or how much life insurance they need. As a life insurance agent, you need to be able to educate your prospects on what kind of coverage they need. Prospects respond well to an agent who takes the time to offer individualized counseling to improve their understanding of the life insurance products available to them. Once your prospect understands their options, it will be a lot easier for them to envision how to fit life insurance into their budget.
What do you do as a life insurance agent to help your prospects understand what kind of life insurance they need? Please share in the comments below.
10 Reasons People Don't Buy Life Insurance
Many people could benefit from a life insurance policy but still choose not to purchase one. Learn why they should give life insurance another look.
There's no question that not everyone needs life insurance. According to the Consumer Federation of America (CFA), there's little reason to buy it if you don't have any dependents, "since there is no economic catastrophe associated with death." Even then, though, there are exceptions, with the CFA declaring that "those who expect family responsibilities soon may wish to get coverage early to guard against a health change that could raise costs. Substantial term life insurance is inexpensive for young non-smokers, so paying for what you don't need yet, but will soon, is not a serious burden."
Still, at least the case can be made that if you're single, and especially if you're single as well as relatively young and healthy, you may not feel a pressing need to purchase life insurance as soon as possible.
The same can't be said for a lot of the excuses that people who pass on buying this type of insurance use when asked to explain their hesitation or indifference. In fact, most of the reasons cited by folks who fail to see the appeal or benefit of life insurance are pretty easily refutable, with the following examples being noteworthy cases in point.
1. Life insurance costs too much (or I can't afford it)
Here's the funny thing about this particular line of reasoning: usually life insurance isn't all that expensive.
That depends on a number of factors, of course, including how old you are when you decide to take out a policy, how healthy (or unhealthy) you are at that time, whether or not you're a smoker, which type of life insurance, and how much coverage you want to buy.
If you're fairly young and healthy and you're not a smoker, though, you should be able to get a 20-year, $250,000 level-term policy for less than $200 annually.
This is far from common knowledge among today's consumers, though, with Todd Silverhart, Ph.D., corporate vice president at LIMRA Insurance Research, sharing that the work he and his colleagues have done in this area suggests that "consumers generally do not have a good understanding of how much a life policy might actually cost."
In fact, he adds, "they tend to over-estimate the actual cost a lot," with a good example being that, when asked (as part of the 2015 Insurance Barometer Study that LIMRA conducted with non-profit Life Happens) to guess the yearly cost of the above-mentioned policy, the average person replied $400. The median response from people under the age of 25, on the other hand, was $600, while a whopping one in four assumed the bill to come to $1,000 or more.
2. I don't need it because I have plenty of assets to leave my loved ones
That may be true, but what form are those assets in at the moment? Are they mainly liquid, meaning your beneficiaries could quickly convert them into cash should the need arise? Or are they mostly in non-liquid form, which would mean real estate, a share in a business, or even jewelry?
If it's the latter, a life insurance policy could provide your loved ones with access to some "ready cash" that would allow them to pay off debts that require immediate attention and also let them retain those non-liquid assets rather than potentially sell them for a fraction of what they'd get if they could hold on to them for a while longer.
3. I'm healthy
You are now, but what about five or 10 years down the road? Actually, none of us knows for sure how healthy—or not—we're going to be tomorrow or the next day, let alone a year or a decade in the future.
It doesn't take much Internet surfing to find stories of people who ignored life insurance because they were healthy or young (or both), only to be blindsided by an unexpected medical crisis that made them ineligible for life insurance.
This doesn't mean everyone should run out and buy as much life insurance as they can afford. If you've got a spouse, or children, or a parent who relies on your financial support, though, you should seriously consider at least some form and amount of life insurance. Even if you regularly get clean bills of health from your physician.
4. I've got too many other things to worry about right now
Maybe you're recently married, or you're busy prepping for your trip down the aisle. Or maybe you're about to have a baby, or you just had one.
Those situations and many more have prompted a lot of people to put "buy life insurance" at the bottom of their to-do lists—assuming it ever made it onto these lists to begin with.
As was mentioned earlier, though, you never know when something unfortunate or unexpected could happen to you, so if there are people in your life who depend on your income, you should make life insurance a priority again as soon as you're able.
Maybe you're recently married, or you're busy prepping for your trip down the aisle. Or maybe you're about to have a baby, or you just had one.
Those situations and many more have prompted a lot of people to put "buy life insurance" at the bottom of their to-do lists—assuming it ever made it onto these lists to begin with.
As was mentioned earlier, though, you never know when something unfortunate or unexpected could happen to you, so if there are people in your life who depend on your income, you should make life insurance a priority again as soon as you're able.
5. I don't understand it well enough to buy it
All sorts of studies have found that one of the main reasons people don't purchase life insurance is that they're confused by all of the varieties and options that are made available to them during the buying process.
According to LIMRA's and Life Happens' 2015 Insurance Barometer Study, for example, 38 percent of participants cited "I’m not sure how much or what type to buy" as their reason for not purchasing.
"Given that buying life insurance is believed to be important and not something that is done often, the uncertainty that surrounds it paralyses many people," Silverhart says.
One fairly obvious solution to this issue is to reach out to an experienced agent so you can be led through the process by a helping hand rather than tackle it on your own.
6. I find the process intimidating
According to a 2014 LIMRA study, more than 70 percent of people who purchased life insurance policies through their employer said they were happy with the process and even described it as "comfortable."
A more recent study from the same organization, on the other hand, suggested that those who go to buy life insurance on their own are far less pleased with the experience. In fact, many say they find it intimidating.
Again, this is another situation where working with a professional who knows the ins and outs of the industry would help ease some of the tension associated with such a complex product.
According to a 2014 LIMRA study, more than 70 percent of people who purchased life insurance policies through their employer said they were happy with the process and even described it as "comfortable."
A more recent study from the same organization, on the other hand, suggested that those who go to buy life insurance on their own are far less pleased with the experience. In fact, many say they find it intimidating.
Again, this is another situation where working with a professional who knows the ins and outs of the industry would help ease some of the tension associated with such a complex product.
7. I have other financial obligations that are more important than life insurance
For some people, spending their hard-earned cash on vacations, or shopping, or movies, or eating out is more important than using it to pay for a life insurance policy. For others, cable, Internet, and phone bills come before life insurance.
In fact, according to the most recent Insurance Barometer Study conducted by LIMRA and Life Happens, 60 percent of Millennial's consider their cellphone, Internet, and cable payments higher priorities than purchasing life insurance, with 49 percent of those 65 and older saying the same thing.
According to Jim Kerley, LIMRA's chief membership officer, “Consumers today are confronted with more financial demands than ever. Younger shoppers in particular realize they need life insurance, but it’s not a priority for them."
One way to make it more of a priority for younger and older consumers alike, he adds, is to reinforce just how cheap life insurance can be—especially if you spend a bit less on eating out, movies, even your daily coffee run and use the savings to fund an insurance policy instead.
8. I don't trust insurance companies or agents
his keeps more people than you may imagine from buying life insurance, as the aforementioned study conducted by LIMRA and Life Happens found that nearly 40 percent of respondents have refrained from it due to the apprehension they feel for insurance agents.
If this describes you, there are a number of places you can go to read up on any companies you're considering doing business with, with A.M. Best, the Better Business Bureau, the National Association of Insurance Commissioners, and your state insurance commissioner's office being four great examples.
9. I'll get to it eventually
Another way of putting the above is to say that a lot of people procrastinate when it comes purchasing a life insurance policy.
"Even though they recognize the value of life insurance and are aware of their need for it, many consumers [30 percent, according to the most recent Insurance Barometer Study] just haven’t gotten around to taking care of that need," Silver-hart says.
his keeps more people than you may imagine from buying life insurance, as the aforementioned study conducted by LIMRA and Life Happens found that nearly 40 percent of respondents have refrained from it due to the apprehension they feel for insurance agents.
If this describes you, there are a number of places you can go to read up on any companies you're considering doing business with, with A.M. Best, the Better Business Bureau, the National Association of Insurance Commissioners, and your state insurance commissioner's office being four great examples.
9. I'll get to it eventually
Another way of putting the above is to say that a lot of people procrastinate when it comes purchasing a life insurance policy.
"Even though they recognize the value of life insurance and are aware of their need for it, many consumers [30 percent, according to the most recent Insurance Barometer Study] just haven’t gotten around to taking care of that need," Silver-hart says.
10. It makes me think about death
Similarly, 30 percent of the men and women who participated in the 2015 Insurance Barometer Study suggested they've avoided buying life insurance because doing so causes them to think about their mortality.
Unfortunately, there's no easy way to combat this particular quandary—other than, perhaps, to point out that the thought of leaving your spouse, or children, or other loved ones in dire financial straits isn't likely to be much more, if at all, appealing thank thinking about passing away.
Q: In what kinds of situations or circumstances would I want to avoid or ignore life insurance?
A: Most experts will suggest staying away from life insurance if you're single, or if you don't have any dependents. Many will say the same in regard to retirees—or at least a certain segment of the retired population. There are times when even folks in these situations may want to buy life insurance, though—with two cases in point being young, single people who assist siblings or parents and retirees who help support grandchildren.
Similarly, 30 percent of the men and women who participated in the 2015 Insurance Barometer Study suggested they've avoided buying life insurance because doing so causes them to think about their mortality.
Unfortunately, there's no easy way to combat this particular quandary—other than, perhaps, to point out that the thought of leaving your spouse, or children, or other loved ones in dire financial straits isn't likely to be much more, if at all, appealing thank thinking about passing away.
Frequently Asked Questions
Q: In what kinds of situations or circumstances would I want to avoid or ignore life insurance?
A: Most experts will suggest staying away from life insurance if you're single, or if you don't have any dependents. Many will say the same in regard to retirees—or at least a certain segment of the retired population. There are times when even folks in these situations may want to buy life insurance, though—with two cases in point being young, single people who assist siblings or parents and retirees who help support grandchildren.
Q: Do "empty nesters" need life insurance?
A: Sometimes, yes. For example, are there people in your life who depend on you for financial assistance? If so, you'll probably want to invest in this kind of insurance even if your children have "flown the coop." Another instance when life insurance may make sense for a so-called empty nester is if you're at all concerned about the Social Security “blackout period” that impacts some folks—women, especially—following the death of a spouse. (Because Social Security pays nothing between when your youngest son or daughter finishes high school and you apply for survivors’ benefits—the latter of which isn't possible before you turn 60.)
Q: I'm a retiree. Do I still need life insurance?
A: Whether or not you "need" life insurance as a retiree depends on your current circumstances. If you're free of debt, you no longer rely on an occupation for income, you have children who are self-sufficient, or if you're having a hard time paying your premiums, you very well may not need, or no longer need it. That said, if you're still paying off your house, or if you're supporting one or more dependents—a good example would be grandchildren you may be caring for, or even adult children who are disabled—you could make a far worse purchase than life insurance.
Source: QuoteWizard
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