Why Life Insurance Is Important?
In one of his profound speeches, Osho spoke about the human tendency to hide from the reality of death. He pointed out that we build crematoriums outside villages to avoid facing the inevitable truth of our mortality. Osho believed they should be at the center of the community as a daily reminder of life’s fragility and the importance of preparing for the unexpected.
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Though everyone knows death is unavoidable, many prefer not to dwell on it. This reluctance often extends to avoiding practical matters like life insurance. People argue, “Why worry about what might never happen?” Yet, a quick glance at any newspaper shows otherwise—accidents, sudden health crises, and unforeseen tragedies happen every day.
This article explores why life insurance is important, how it works, and how to make the best decisions for your financial security.
The Unpredictability of Life
Life is full of uncertainties. Road accidents, natural disasters, and health crises occur daily, impacting individuals and families alike. Consider tragic incidents like the Jeju Air accident in South Korea, where 179 out of 181 passengers lost their lives. Or the LPG tanker collision on the Jaipur-Ajmer highway that claimed 11 lives instantly. These events remind us that life can change in an instant.
Yet, many disassociate themselves from such news, thinking, “This won’t happen to me.” But for Mahendra’s family, this illusion shattered when he died in a road accident. Mahendra’s lack of term insurance turned his family’s grief into a lifelong financial struggle. His children’s education and dreams were derailed, and his wife had to give up simple necessities. This stark example underlines why life insurance is important—not just as a financial tool but as a shield against future uncertainties.
Understanding the Basics of Insurance
Insurance operates on a simple principle: risk-sharing. A group of individuals pools their resources into a central fund managed by insurance companies. If one person faces a mishap, the fund provides financial relief. This collective approach minimizes individual risk while offering peace of mind.
Premiums—monthly, quarterly, or annual payments—are the price of this peace. For example, term insurance ensures your family receives financial support if you pass away during the policy period.
Historically, the concept of insurance dates back to 100 BC when Roman soldiers contributed to “burial clubs” to cover funeral expenses. Over time, insurance has evolved to protect against various risks, from health emergencies to accidents on movie sets, like Tom Cruise’s stunts in Mission Impossible.
Types of Insurance Everyone Should Consider
Life Insurance:
Life insurance, especially term insurance, ensures your family’s financial stability in your absence. Unlike endowment plans that return the premiums paid, term insurance is purely for protection. It is affordable, flexible, and focuses on covering critical financial needs.
Who Needs Life Insurance?
Breadwinners with dependents.
Young professionals planning for family responsibilities.
Anyone with outstanding debts or future financial obligations.
If you have no dependents, significant wealth, or are past the age of 70, life insurance might not be necessary. However, for most people, securing term insurance early is vital, as premiums increase with age.
A general rule of thumb: Your life cover should be at least 10 times your annual income. For example, if you earn ₹1.5 million annually, aim for a cover of ₹15 million. This ensures your family can maintain their lifestyle and achieve goals like higher education or homeownership.
Health Insurance:
While life insurance supports your family after your death, health insurance protects you during medical emergencies. Rising healthcare costs can deplete savings, making comprehensive health coverage essential.
Factors to Consider When Choosing Health Insurance:
Coverage amount.
Automatic restoration benefits.
Waiting period for claims.
Co-payment clauses.
Coverage for ICU expenses and specialized treatments.
Many rely solely on employer-provided health insurance, but these plans often have limitations. Having a personal health insurance plan ensures uninterrupted coverage, even during job transitions.
Common Misconceptions About Insurance
“I’m too young to need insurance.”
The earlier you invest in insurance, the lower your premiums. Locking in a policy while young is a smart financial move.
“Insurance is too expensive.”
Term insurance is surprisingly affordable. For a premium as low as ₹1,000 to ₹1,500 per month, you can secure a life cover of ₹20 million.
“I’ll worry about it later.”
Procrastination can lead to higher premiums and limited options. Securing insurance early offers financial security when you need it most.
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The Role of Insurance in Financial Planning
Insurance is not just a safety net; it’s a cornerstone of financial planning. It ensures that your loved ones are not burdened by loans, educational expenses, or daily living costs in your absence.
For instance, Mahendra’s story shows how a lack of insurance can derail a family’s future. Conversely, a well-thought-out insurance plan can turn tragedy into a manageable transition, allowing your family to grieve without financial strain.
Conclusion: Why Life Insurance Is Important
Life insurance is more than a financial product; it’s a promise to your loved ones. It offers peace of mind, knowing that your family’s future is secure, no matter what happens. From covering daily expenses to funding dreams and managing medical crises, insurance protects against the uncertainties of life.
Health and term insurance are the cornerstones of a secure financial plan. Whether you’re single, married, or raising a family, understanding why life insurance is important helps you make informed decisions. Don’t wait for a wake-up call—act now to ensure your family’s safety and your peace of mind.
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