Term Insurance Vs Car Insurance: A financial decision you may regret

Ajit was ecstatic when he brought his new Maruti Swift hatchback. Out on his first trip with his wife Reena and 5-year old daughter Seema on the Alibaug strip, the father in him was quickly dumbfounded. The reason? Seema had opened the dashboard and out of child-like curiosity asked daddy about the colorful insurance papers. Ajit explained that they were meant to protect the car if it by chance got stolen or destroyed. It was then that Seema, unknowingly, asked him: "What if you get stolen? Will they return you too?" This got Ajit thinking about his life and what will happen to his family when he is not around. A car can be bought again, but not his life.

Insured your car, what about your life?

Like countless people, Ajit had bought a car insurance because it was mandatory. However, he didn’t have any life insurance on him even though his stay-at-home wife and child fully depend on him. Just as you protect the car against all damages by buying a vehicle cover, Ajit’s life needs to be insured too. Without him, the weight of outstanding liabilities, daughter’s education and his wife’s old-age would crush his family’s future. Ajit is not alone. With an insurance penetration of less than 5%, millions are not taking the cover. Term insurance cover is affordable, convenient and easy way to ensure that your family’s finances are taken care of long after you are gone.

As breadwinners of the family, insurance our lives should be the first financial decision we make, but we don’t. Blame it on ignorance or totally careless attitude of 'humein kuch nahin hoga', common people never realize the lurking risk. If a car gets destroyed, you can buy a new car but we can’t do the same with a life, especially if it’s of the bread-winner i.e. YOU. According to latest statistics, about 1 lakh vehicles faced road accidents in a year, and 1.37 lakh people were killed. Less than 3% had any insurance.

Insuring your life will cost you half of what you spend to insure your car

After spending Rs 4 lakh and upwards for a car, we buy car insurance to drive around the roads peacefully. Little do we realize that the real peace of mind lies in fully protecting ourselves and our dear families. If you earn Rs 50,000 salary a month, you are worth Rs 6 lakh a year alone. With interest rates falling at a sharp clip to about 7%, today you would need Rs 85 lakh as fixed deposit to ensure your family gets Rs 6 lakh income a year. While a car insurance costs about Rs 20,000 to get cover for less than Rs 3.5 lakh for a year, an online term insurance policy costing Rs 10,000 can cover you for over Rs 1 crore. So, buying a life insurance gives you 28-30 times more the cover at about half the price!

None of us know when and how we will die. A painless death is a possibility, but that doesn’t ensure a painless life for your dependents. Accidents happen, and even after the best treatment possible, lives are lost. In the meantime, hospital costs run high. It is estimated that head injuries are also the costliest procedures.

An accident of the bread-winner can really destroy the surviving family. This is why term insurance covers with accidental death benefit are a must. In case of death due to accident, the nominee is paid double the sum assured amount. So, if you have covered your life with an Rs 1 crore term insurance, the payout becomes Rs 2 crore in case you succumb to an accident. The extra payout helps the family pay off any costly hospital bills, and resume their life.

Conclusion: If you actually believe car insurance defends you financially from damages to the car, don’t leave your all-important life unprotected. Insuring your life with a term insurance is cheaper and much more important than insuring your car. So buy a term insurance before your start the car engine next time.

Also read:Can you afford to save your own life?

Protect first, save and invest next: Why you need term insurance

Don't ignore! It is very important to insure income that your earn