No one needs to explain the advantages of having life insurance. But people still avoid purchasing life insurance, especially in India. Less than 33% of the population in India has a life insurance policy. There are two main reasons behind this large gap, monetary limitations and lack of knowledge of the consequences of not having a whole life plan. Here you will get to know more about those consequences in detail.
Consequences of Not Having a Life Insurance Policy
Most of the consequences of not having life insurance are when the family unexpected loses a member, especially a breadwinner. And these usually pretend to have financial aftereffects, but most of them actually have emotional backdrops. That is why it is unwise to opt out of having life insurance.
No Financial Protection to Family
The major disadvantage of not having life insurance is that the family will not have financial protection. Such lack of financial protection usually affects the family budget, and all the income sources will come to a halt or lag due to the person’s absence.
No Surety of Children’s Good Education
When a person doesn’t have life insurance, they risk their children’s education and future along with the family’s sustenance. This, in turn, results in them not getting a chance to follow their dreams or choose an educational course of their liking.
No Retirement Fund for Parents or an Elderly Spouse
Retirement funds are necessary as elder people cannot work due to legal or health issues. Most of the time, in the case of parents, people think that they will pay for the requirements when the need arises. And these expenses are from the salary they earn. But in case of the child’s absence, the parents won’t have any means to meet the cost of living during retirement.
Dependents Relying on Debts
When the revenue from salary or business ventures stops or interrupts due to the untimely demise of the contributing member, the family will have no income. And in such situations, they will have to rely on loans or borrowings to meet their day-to-day and other expenses. These debts are all risky as someone could easily manipulate and take the benefit of a family facing such distress.
Money Wasted in Income Tax
By not having life insurance, a person also loses a lot of money in income tax. As per the rules of Indian Income Tax, a taxpayer can get a tax deduction of up to INR 1,50,000 per year on insurance premium payments. So, they can save a lot of money which they spend as non-refundable taxes. Also, the interest returns of most investment schemes attract taxes. But life insurance claim returns are fully tax-free. However, please note that tax laws are subject to change from time to time.
How to Overcome Money Related Restrictions in Purchasing Life Insurance?
As mentioned earlier, people also avoid life insurance due to their personal monetary limitations. They can always choose term insurance or carry out financial planning to overcome such issues. Although term insurance does not have a return of invested premium, it can offer coverages at very cheap rates. Or you can use the method of financial planning and make room for an insurance premium. And when you use the correct methods, you will not even feel the premium burden.
These consequences are grave enough for anyone to leave them disregarded. It is good to have life insurance to avoid finding yourself in such financially and mentally compromised situations. And to get assured returns from life insurance policies, you can choose a reliable insurance company.