Insurance is not about investment and returns. It is a tool for protection and it should be perceived in its true and correct form.
Martijn De Jong
You Only Live Once, more commonly known as YOLO, is a funny concept. It makes people do extremely adventurous and sometimes ridiculously reckless things. While living in the now is perfectly okay, shouldn’t you be more responsible when it comes to your future if you live only once?
Andy Rooney, an American author, and journalist had said ‘death is a distant rumour to the young.’ While some millennials attest to the illusion that there is ample time to prepare for the eventuality of death, many prefer other financial products over insurance because hasty returns are a priority and want for them.
I recently struck up a conversation with a twenty-something man and he almost instinctively told me that he would prefer to buy any other financial instrument but a life insurance policy for ‘productive’ use of his money. In his opinion, he can use the money he would otherwise use for premiums and build a fund robust enough to provide him the security that an insurance policy would.
There is only one problem with this thought - insurance is not about investment and returns. It is a tool for protection and it should be perceived in its true and correct form.
Ifs of life
While the fact that India is a severely underpenetrated insurance market is not news, the extent of underinsurance here is a different story. A 2015 Swiss Re report estimates that for every Rs. 100 worth of insurance required for protection, an average Indian spends Rs. 7.8, leading to a staggering deficit of more than 92%.
Clearly, it is a concerning state of affairs for India. Indians are worrisome by nature and constantly plagued by the ‘ifs’ of life. ‘What happens to my family if I incur a big loss in my business?’ ‘What happens to my family if I develop a terminal disease?’ We spend all our time worrying about these risks, but how many of us actually buy protection to secure our loved ones if any of these scenarios are to become a reality?
If you look at it from a crude perspective, you hedge your risks every single day in some form or another. A homemaker will buy a wider variety of food items and ensure a healthy mix of food supplements in everyday food to ensure that the family members don’t get tired of the diet.
You take simple precautions for your family like taking your spouse to a physician when ill instead of relying on home remedies, investing in a good toddler car seat for your child’s safety during travel or child-proofing your house after your baby starts crawling, reminding your spouse to wear a seat belt or carry a helmet and adhere to traffic rules.
When you are prepared to take such small precautions for your dear ones in everyday life, why do we hesitate before taking long-term protection steps like buying a life insurance?
Life is a gamble without insurance
The perception that ‘I will not reap the benefits of the premiums paid’ keeps many from buying an insurance policy. Several people think life insurance is a costly affair. On the contrary, a term insurance policy is the most cost-effective method to safeguard your loved ones in case of your untimely demise. While it is crucial that you diversify your financial portfolio and have a mix of risky and steady assets, don’t leave out a term insurance policy.
You might believe that you can build a fund big enough to tide over your family’s financial duties in the event of your death, but a term insurance is an ideal instrument to do it. I recommend that you do your homework, recognize exactly which product do you require and how much of a risk cover you need.
A term insurance will give you the peace of mind to live in the now. So, take the plunge!(The writer is Chief Digital Officer Aegon Life Insurance)