Debunking insurance myths: Do only breadwinners need life insurance?

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The financial impact of a homemaker or a stay-at-home retired parent is often undervalued. Even if you look beyond their silent, unpaid efforts of managing household chores, there is child support and education, caring for the sick and old, and a myriad of other things that keep the household running. If your homemaker spouse dies, how will you manage the little auxiliary expenses that went uncounted until now?

There would be a sudden spike in daily household maintenance like cleaning, cooking, etc. Someone must be hired for child care too. All these can be costlier if you live in a metropolitan city. It is an insurable risk and home-makers must buy life insurance even if the family breadwinner owns one. Joint insurance policies can be a good option worth exploring here.

Does everyone need life insurance?

“A breadwinner’s demise can inflict a considerable additional financial burden on the family. Having a life insurance policy in place in this scenario becomes critical to ensure that the family can stay afloat in difficult times. But for other family members, having a life insurance coverage also means to ensure that one doesn’t leave a financial burden for their loved ones after death in the forms of medical and funeral expenses or existing debts,” said Peuli Das, chief and appointed Actuary at IndiaFirst Life Insurance Company Ltd.

While the breadwinner indeed deserves priority, however, every family member equally qualifies to get a life insurance policy for themselves too Life insurance is only meant for the person who earns the majority of the household income is probably the greatest insurance myth of all times.

Single with no dependents – Do I still need insurance?

Another classic tale of confusion while buying an insurance policy is whether singles need it as much as those with a family? If I don’t have any dependents right now, why invest in life insurance? Nobody wants to invest their hard-earned money when they’re young and supposedly carefree. You’re tempted to spend on your wants rather than needs. However, it might cost you heavily as you grow older and wiser.

“Life insurance is about securing ones’ goal and being self-reliant. It is probably the best way of ensuring that one’s debts and liabilities are not passed on to anyone else. It is also best bought early – the lower ones’ age at the time of entry, the lower would be the premium for the same coverage. A smart way is therefore to lock in low rates when you are single without dependents and allow your funds to build with time and support you in building your family,” Das advised.

You can also use add-on benefits to cover medical expenses as well as treat it as a retirement corpus with tax incentives and a smart financial planning tool.

“Some look at it as a means of legacy planning as well – a way to leave your death benefit to a cause that you care for, be it an NGO working for people’s welfare, or maybe one’s alma mater. After all, life insurance at its core is caring for those who you care about the most,” Das added.

Is life insurance for the privileged?

It is, again, one of the most popular misconceptions that insurance is a luxury meant only for the rich. On the contrary, it’s the less wealthy who need to worry about the debts and liabilities that one might leave behind, as well as counter the risk of your family undergoing immediate hardships when you are not there. Moreover, a life-threatening situation like the Covid-19 pandemic makes it equally important for all rungs of society since everyone has comparable life risks.

“You may often hear that the cost of life insurance is overblown, where in fact the cost of a pure term plan is the true reflection of one’s current and future financial worth, making it affordable to the common populace. The coverage you get is often a few hundred times the premium you pay and is an easily manageable way for building a corpus for any future planned (retirement) or unplanned (accident, health issues) expense,” Das concluded.