Indians are under-insured and don’t know it!

TomorrowMakers ™

Indians are under-insured and don’t know it!

18 July 2014
A prominent survey revealed that 95% of Indians are under-insured. Are you one of them?
 
 

You don't really need a degree in Economics to understand one very basic principle: The more you earn, the more you spend. Now, imagine a scenario where an unfortunate event occurs and the chief earner of the family is no longer around to provide. The radical lifestyle changes you would have to make to make ends meet may be hard to imagine in your current scenario, but with the right planning can be made manageable.

In situations like these, life insurance can be a huge help. Life insurance is basically a way to provide income to your family when you can no longer do the earning.

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In this regard, however, it is very concerning to note how a very large percentage of the people of India are actually under-insured.

According to the annual report of 2014 released by the IRDA, life insurance penetration (when the value of premiums is expressed as a percentage of the GDP) for India was at 3.9% - significantly lower than the world average of 6.3%. This just showed that India was still trailing considerably in the Life Insurance sector as compared to the rest of the world. Market research, on comparing the existing life insurance and the actual required life insurance for people across various age and income bands has shown that people have nowhere near enough of what they need, in case of the breadwinner’s demise. It is a misconception that only families from the middle and lower income groups of the country need life insurance. in fact, as income increases, life insurance cover grows at a much slower rate.

Related: Insurance policies to protect what's important to you [Infographic]

The conclusions we can draw from this are simple.

First, we understand that high income groups depend on each person’s income just as much or even more. In the absence of even a singular income, these groups would need a huge amount of financial support. Life insurance cover may be the only way they can continue the lifestyle they have enjoyed up until that point.

Secondly, there is a misunderstanding amongst people about a simple fact: as you earn more income, you have to pay more premiums. Instead of saving more, people actually keep aside smaller amounts of money to be used for insurance as they earn more. What they tend do is invest more in financial products that do not offer the protection and security that insurance does.

This shows a fundamental gap in understanding: life insurance is meant to protect what matters most to you, and as the valuable things in your life keep growing in quantity, you need to make a greater effort to keep it safe, rather than less!

Life insurance can help you sleep well at night, knowing that no matter what happens, the life you’ve worked so hard to give the ones you love will continue uninterrupted. If you need help finding the right policy, here are 5 things you must know before you buy life insurance.

 

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