If Life is unpredictable, INSURANCE can’t be optional

Life is unpredictable, INSURANCE cannot be optional

One of my blog readers asked me – ‘Sreekanth, I observe that you have been publishing more articles on Insurance planning than any other category, why is it so? Why do you give so much importance to protection planning?’

My answer to this question is –

  • Life has become very unpredictable. It is OK to PAUSE or to postpone your investment decisions temporarily. But it can be very risky if you postpone buying an adequate Life / health insurance cover. Being under-insured or un-insured can be financially very risky.
  • We can see lot of mis-selling happening in insurance industry. So, I am trying my best to create awareness about various aspects of protection planning. If you have an unwanted life insurance policy, it may lead to both ‘wealth erosion’ and also the sum assured may not be adequate for your family to continue the same standard of living (god forbids, if any unforeseen event happens).
  • Third reason is more of a personal one.

Let me give more details about the third point with two real life incidents.

  • A good friend of mine has expired last week. We were involved in few real-estate deals in Bangalore. It is very rare to find a person like him especially in real estate industry. He studied till 9th standard and he is from a very very poor family background. He has no other source of income except for ‘brokerage / commission’. His wife, two kids and parents are his dependents. I had advised him a couple of times to take term insurance and also a health insurance plan for self and for his family members. He was planning to take a health insurance plan this month. But, God has other plans. He died due to DENGUE fever and kidney failure. They couldn’t afford to pay for medical treatment in a private hospital. Unfortunately, I came to know about this after everything is over as I am currently not residing in Bangalore. (May his soul rest in peace)
  • Let me give you one more real life example. This incident has happened in my life. I lost my father when I was in 7th  standard. He was an employee of a Public Sector Bank. He died in an accident when he was travelling in office vehicle (on official duty). He did not have adequate life insurance cover. But, the office vehicle was insured. We had received personal accident claim of few lakhs. The entire claim amount was deposited in FDs. The bank interest rates were very high during 1990’s. So, we (mother, sister & myself) could survive on these interest payments alone. We could complete our studies with this insurance claim amount only. (May be this is also one of the strong reasons why I have chosen to leave my IT job and start providing unbiased financial advice / information through my Blog ReLakhs.com)

So, anything can happen to anyone at anytime. We have to be prepared and plan in advance.  (The Secret of a Financially Happy Living is to Plan for all the Known Events in your life and to Make Provisions for all the Unknown events in your life!!!)

Insurance Planning should be your top most priority

  • You need to first protect ‘What you have‘. It can be your Life, Health, Property, Vehicles etc., Plan for sufficient insurance coverage and buy right products to cover the risks associated with all these. Financial Planning Pyramid insurance as a foundation block
  • Earning Rs 1 Lakh per month and having a life insurance cover for Rs 1 Lakh (Sum assured) is meaningless. Buy a life insurance cover based on your earning potential.
  • Have adequate life insurance if you are the bread-winner of your family and if you have dependents. Buying a Term plan is the best way to get adequate life insurance cover.  It is advisable to avoid buying traditional plans like Money-back or Endowment plans. 
  • Have adequate life insurance cover if you have financial liabilities (home loan etc) & financial commitments (obligations).
  • Do not treat insurance as an expenditure or as an investment. It is your responsibility.
  • Buy independent Health insurance cover. Get your family too covered with a health insurance policy. Your employer might provide group Mediclaim till you retire. But, remember, it can be very difficult to get adequate health insurance cover as you grow older or during your retirement stage.
  • Understand the importance of having a comprehensive Personal Accident cover. It is very essential to have ‘permanent disability cover’. (Read – Best Personal Accident Plans in India)
  • Other insurance covers like ‘home insurance’ or critical illness insurance are also important based on your profile. For example – If you are a Retiree and receive income from house property only, it is very much essential to have your property covered with Home Insurance.
  • Most of us spend more time to plan investments but very less time on insurance planning. Some people are even superstitious about taking any type of insurance. They consider it as bad omen (bad shagun). It is better to change that perception.
  • If you have understood the importance of insurance especially about life and health insurance, request you to educate / convince people around you to take right insurance plan. It can be your friend, maid, car driver, relative…also educate them about how to claim when an unforeseen event happens.
  • We are mortal. If death is certain, can insurance be optional? If life is unpredictable, insurance can’t be optional.

(Image courtesy of fantasista at FreeDigitalPhotos.net) 

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  • Somanath Mahapatra says:

    Very true words.. Thank-you Sir. It is always so easy to neglect insurance needs which should be a top priority.

  • Vidhi says:

    This article is great. It is a real eye opener on importance on Insurance. Every citizen should be educated on having Health Insurance. Thank you.

  • RAJ PAI says:

    Dear Sreekanth, this article is an real eye opener on Insurance requirement of bread winner. please specify what is the amount of insurance a person (sole bread winner) should have? what are the criterias for that?
    raj pai

  • Veerendra Prabhu says:

    Hi Shreekanth,

    Really Appreciate all the hard work you are putting in to educate people and help them take various financial decisions.

    Keep up the good work buddy.


  • Sandeep Bandi says:

    Hi Srikanth,

    Great Article again 🙂

    I didn’t have any Insurance till today apart from what my Employer s providing. I though, that is more than enough. But based on your article, I understood the importance of Insurance and am planning to go for a Term Insurance policy.

    Apart from Term, what other policies do you suggest as I am the sole bread winner of my family and I am 24 years old(Single).


    Dear Sreekanth

    in your view how many type of insurance (i.e. term, health, wealth, child etc) a 30yrs age person should opt for???

  • Mandar Joshi says:

    Dear Sreekanth,

    Your article on Life Insurance endowment plan is excellent and cleared my misconception on this.

    I have a LIC “Jeevan Chaya” policy, Rs 25535/ yearly premium, SA 4 Lakhs plus bonus, for which I have premium for 18 years continuously. I took the policy in 2006 and have paid the premium for 11th years regularly. I need to pay another 7 years ( total 1.78 Lakh) to keep the policy alive and to get all endowment benefits.

    Request advice whether I should continue with the policy for next 7 years or surrender. I heard that I may end up with losses as LIC will not even pay me back the amount which I paid as premium? I understood that there is hardly around 6% appreciation as bonus that I can expect ( that too without considering inflation).

  • mitraj says:

    Please guid me to Planning for Insurance & Investment .
    I am 25 year old civil Engineer . just before four month got married .
    presently my Monthly Income in 35000 and my wife income is 15000 she is Pharmacist .
    after one month we are going to shift in Ahmadabad where we have to start all from zero.

    Please guide me which type of Life insurance , Heath insurance and investment i have to do.
    i have only
    1) LIC jivan aanand policy (815 ) 27 k P.A. ( only one primiam paid in march 2016)
    2) Open PPF account 10 day before .

    please guid me .

  • Saurabh says:

    Great insight. I had no idea that there are so many details, but after going through the article i feel that i know something. My dad advised me to buy TATA AIA Life’s money back Insurance plan, It gives you the flexibility to choose from various term options to meet your financial commitments with the advantage of paying for only half the term. After much debate I invested in insurance and now realize its true value. Its true that we need to be prepared and plan in advance for us as well as for our dependence. Insurance is a must to secure our future. It is also a shocking fact that India has a protection gap of 92%.

    • Dear Saurabh,
      May I know your objective for buying TATA money back insurance plan?
      Do you have any other life insurance policies in your name?
      May I know if you have dependents and/or financial obligations?

  • Trisha says:

    If one is young, but does not have dependants, nor plans to, is there much sense in life insurance?

    (Very useful blog, btw. Thank!)

  • sreejith says:

    I was really late to find out this site. had answers to all my doubts regarding life insurance.

    thank you for your efforts

  • Germaine Low says:

    Dear Sreekanth,
    What is the important quality of insurance that people normally forget?
    Why has the true meaning of insurance been diluted?

    • Dear Germaine,
      Majority of us are forgetting that insurance is for Protection (to cover risks), instead it is now more remembered or treated as an INVESTMENT / SAVINGS option, which I believe is wrong.
      Prospective policyholders want RETURNS on their insurance investments (don’t like to say it as an investment) & most of the intermediaries also try to sell (mis-sell) traditional plans to meet the demands of their prospects and also they do get higher commissions.
      Term insurance (life-insurance) is the purest and cheapest forms of insurance.

      • Germaine Low says:

        Why is there a need for health insurance when the government has already implemented plans that reduce the need for insurance e.g affordable healthcare?
        How do you redefine insurance? To make people ho are new to insurance seem more interested in it?

  • Raghu says:

    Hello Sreekanth,

    I am working in service industry and last year onwards qualify in 30% tax bracket. my age is 36 year and below are my investment portfolio:

    1 Post office RD account = 3k pm for 5 years started in 2012
    3 LIC Policies bima kiran (T.no 111) lock period of 30 years started in March/2000 Rs.200 per quater
    1 LIC Policy new bima gold (T.no 179) lock period of 20 years started in March/2007 Rs.4k p.a.
    1 LIC Policy jeevan anand (T. no 149) payment term 20 (policy term 72) started in March/2009 Rs.27k p.a.
    1 PPF account = I make sure to invest roughly between 50k – 100k p.a for past 7 years

    Most of the policies were bought by my father and i still continue paying them. i have a 4 yr old kid and not sure if the above investments are good for me? and even not sure if the qualify my insurance coverage. please suggest what is right for me and i am not a high risk taker.

    thanks in advance.

  • pradeep says:

    Great job Sreekanth,

    I have a general query, which may also help other visitors too.
    Will the nominee get death benefits in any type of death event either it is a natural, accident, critical ill, or suicide?


    • Dear Pradeep..Yes, natural death (or) death due to accident or illness are covered. ‘Suicide clause ‘ is based on the policy wordings. Generally, if death is by suicide, it will not be covered for the first 2 years.

  • mahesh prasad says:

    Hi Sreekanth
    Excellent article, I really appreciate your work.
    I have been trying to explain people about advantage of having term plan over traditional lic plans, other financial planning g basics which you have mentioned in other articles.
    I have also provided your blog link to them.
    Most of them are adamant and not ready to accept that traditional insurance plans are waste.
    They are ready to pay Car/bike insurance without expecting any returns but not Term plan which covers your life.
    People start asking about returns from term plans forgetting it fulfils the required insurance cover.

    thanks once again

    Mahesh prasad

    • Dear Mahesh,
      I know it is tough to educate and convince everyone about term insurance plans. But appreciate that you are trying your best. Kindly spread awareness and keep doing!
      As motor insurance (third party liability) is mandatory, we got to buy it. If it is not mandatory as per law then I am sure many of us will ignore taking it too..
      I believe that INSURANCE can not make anyone rich at the same time if you have right plan (term plan) with right amount of insurance, it will ensure that the policyholder’s family do not become poor (in case if any unfortunate event happens).

  • Vinoth says:

    Dear Sreekanth,

    I had opened term insurance with Edelwise tokyo. I have a Jeevan anand policy with LIC and critical illness plan with ICICI.

    Do I need to provide the LIC & ICICI details to get my term insurance ? What all factors we need to provide smooth transaction of a Term insurance?


  • Sreedhar says:

    Good one Sreekanth !!! Appreciate your efforts !!!

    Observation in friends circle, every one wants to do it, but more options in the market confuses more and not able to narrow it to one. Which one is good ? Which one covers more ?? Which one has claim ratio more ???

    Ofcourse, At least people should start think about have atleast some thing is better than nothing !!! People have to start think wisely.

    • Dear Sreedhar,
      Yes, better late than never.
      Actually, term plans are very easy to understand and easy to buy. Most of the popular term insurance plans are available online at very affordable premium rates.
      As long as the proposer discloses all the required information in proposal form honestly, it is mostly fine to buy a term plan from any company.

  • Prakash says:

    I was thinking for quite a long time to go for term,but now I have decided to go immediately . Icici term or Hdfc click 2 protect which is your choice?

  • Rajesh says:

    You have raised very valid reasons to buy insurance and appreciate your efforts for stressing more on insurance/risk planning..

  • Surendra says:

    Dear Sreekanth,

    I totally agree with your comments and I sincerely appreciate the way you are trying to educate people like us regarding the importance of having insurance coverage.
    Shared this blog on my facebook page.


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