Last updated: December 11th, 2017
Life is uncertain. No matter who we are or what we do, no one knows what the future holds. Although we all want to live a long life, death is the only certainty in our lives, albeit an unpleasant one. Now imagine, what if we were to die early? When we are still in our working lives, having dependents, mouths to feed, loved ones to care for? Sounds scary, but can we be certain that we won’t? Many people have died early, due to illness, accidents, calamities. We cannot do much about the mental agony and emotional turmoil our loved ones will have to go through, but can we at least secure them financially? Life insurance exists exactly for this purpose.
A life insurance seeks to financially secure the lives of the dependents of the insured person. So, since all of us are going to die one day, does everyone need to have life insurance? Not exactly, read on.
Who should have life insurance
Anyone who is earning and has dependents should have a life insurance. A spouse who does not earn, or earns much less, children who are not grown up, even ageing parents who might have a paltry retirement corpus and depend primarily on your earnings are your dependents. Should anything happen to you, they will be in a financial mess. A life insurance will help to replace at least a part of your income so that they can go about their lives.
Therefore, if you are the sole or primary breadwinner for your family, you should have life insurance. Even if you are not the primary breadwinner, but your family depends on your income for part of their necessary expenses, you should have life insurance.
Now, it is clear from the above statement that if you don’t have dependents, you don’t need life insurance. However, let’s take the case of young, single people who have just started earning. They are unlikely to have any dependents. So in theory, they do not need to have life insurance. However, they are very likely to start a family soon; get married, have children; in other words, “settle down”. They would need to have life insurance then.
Well, life insurance policies cost a lot less when you are young, getting costlier as you grow older. The policy premium for a 25-year-old would be much less compared to the premium for a 32-year-old. Life insurance policies are long term products, with policy terms of 20, 30 years. So it does make sense for a 25-year-old single person to take a life insurance policy for 30 years at a lower premium than wait till they get married and pay a higher premium at a later age. With every passing birthday, the cost of buying a life insurance policy will increase.
An added benefit of Life Insurance is that it offers tax benefits under section 80C. Now, don’t we all like to save a bit of tax?
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