The Most Authentic Guide on Personal Finance and Investments


(Funny) Words of Wisdom : "Someone stole all my credit cards, but I won't be reporting it. The thief spends less than my wife did." ~ Henny Youngman

Thou Shall NOT BUY Life Insurance...

Lesson No.1: Life Insurance Policy is NOT an investment

Lesson No.2: Life Insurance Policy is NOT a tax-saving product

Lesson No.3: Life Insurance Policy is NOT a lottery

Then, what is Life Insurance?

Life Insurance is simply a financial tool to protect your near and dear from financial hardships, should anything unfortunate happen to you and the income flow stops. 

This being the very essence of Life Insurance, there are some very clear cut instances when buying life insurance cover would be a bad choice indeed.

Key among these are discussed below.

...If your primary objective is investing your money
Life insurance policies do not make a good investment. The returns are comparatively poor. There is very little flexibility to make changes, which may become necessary if your financial situation changes (which will surely keep happening). There is very little scope for diversification. So stick to Term policies just to cover the risk to life and for investment opt for the pure investment products.

...If your primary objective is saving tax
As mentioned earlier, life insurance policies are not a good product for investment. Therefore, avoid using them (except term policies) for tax saving purposes. There are better tax-saving products available. So keep away from insurance.

...If you propose to insure your child
Any unfortunate eventuality involving a child is no doubt emotionally very traumatic. But it usually does not hurt the family financially. Whereas, insurance cover is for mitigating the financial difficulty, that may arise with the death of the insured. Hence, taking a policy for a child is meaningless. It is an unnecessary expense, which should be avoided.

say-no-to-insurance
No means no when buying life insurance for wrong reasons.

...If you are attracted by the advertisement hype
From their business perspective, the insurance companies and the agents may be more keen to sell investment-linked policies vis-a-vis the term policies, as the premiums and commissions are much higher. And hence the advertisements and promotions may speak more about such policies. Therefore, it is for you to keep your interests in mind and not be carried away by persuasive agents and publicity.

...If you a lone bird
Insurance is for the benefit of the dependents. Thus, if you are single, with no person in this entire world being financially dependent on you, it may not really be necessary for you to buy an insurance policy. Who would you nominate to receive the insurance money, if something were to happen to you?

...If you are wealthy
You are a person of abundant means. You have immense wealth comprising properties, bank balances, investments, etc. In your absence, this may be more than sufficient for your dependents to continue living comfortably. A few lakhs of rupees from the insurance company may not make any material difference to their future financial well-being. If such were the case, then you don't need any insurance.

...If you are retired
If you are retired and not earning any income, your death is not going to financially impact your family. If you then buy an insurance policy — even a Term Insurance Plan — you are basically betting on your death. Is that what you want? Do you want to die early, so that your family gets some money?

In short, don't become the victim of media hype.

In short, don't become the victim of tradition.

In short, don't become the victim of irrationality.

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Ignorance is like a SIGNED BLANK CHEQUE... anyone can MISUSE it.

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