Life is predictably unpredictable
‘Life is what happens when you are busy making other plans’,said John Lennon, a member of the famous Beatles band years ago. What he said is as true today as it was then. In fact, more so because of the unpredictable pace at which life moves forward nowadays. In such a scenario, it becomes imperative that we make plans to cover those plans that have come unstuck because life has made other plans.
Confused!? Let me explain
Lets say, you have a job; a decent paying one which allows you to buy a house and a car on instalments. Cool! You also have a nice little family and your life seems picture perfect today.
Now, just imagine if all this gets derailed when you are laid off from your job after suffering a critical illness or worse still, if you meet with an untimely demise. All of these undesirable events would put paid to all your future plans and your picture perfect life will come apart at the seams.
Life insurance is for those uncertain events
This is where life insurance comes handy. Simply put, life insurance ensures that you have the reassurance of not having to face financial troubles in the event of an undesirable situation. Well prepared is well armed. Events like death, illness etc can occur anytime and it’s prudent that one is prepared for it and has the wherewithal to face it with certainty and financial might.
Life Insurance is not investment
Most people understand life insurance as an investment avenue like a fixed deposit or a tax-saving one. Far from this, the primary objective of life insurance is risk coverage. So, when you buy life insurance, you actually ensure that your family is protected financially after your demise. You pay premiums regularly and in return the insurer promises to pay a designated amount if the event for which you’ve covered yourself occurs.
If you, as a bread winner of the family meet with an unfortunate demise, you may leave behind a lot of costs and liabilities like education expenses of your children, outstanding home loans or just simply maintenance costs of living. Suddenly, your family may be faced with the scary prospect of having to cope with the financial burden of life after your demise. A life insurance policy will ensure that your family stays protected after your demise as the insurer will give your family a lump sum or monthly pay out. This is called as the death benefit & this is the primary goal why a person should buy an insurance policy in the first place.
The longer you plan for, the better
Along with this, as a secondary objective, a person can look at insurance as an avenue to build up some corpus that will serve as retirement income. Life insurance isn’t designed as an investment as prima facie it won’t give you short-term returns, say, in a year or so. For life insurance to give you returns or benefits, it is necessary that you stay invested for a longer period of time.