A few days ago I did a post sayings ‘Indians are under-insured’. It was so good that Dr. Khan came and commented (!)..
However some of the comments were really saddening!
When a person died (and his son died with him) – his wife got more money on the child’s policy than what she got on her husband’s policy.
This is so anectodal! This is like saying my grandfather died lying on his bed…my grandmother died in her sleep…so I will not sleep (or worse I will not sleep in a bed!).
The mistake that the couple made was that the father was terribly under-insured and the son was unnecessarily over insured (or insured at all if he was not earning). The probability of an older person dying is higher than a younger person dying. Period. Insurance premia works on probability. My father lost a brother to an accident (60 years ago, when the brother was 30) – but all other brothers died of old age. As did my grandparents.
One event does not make a rule.
I do not know enough about medical insurance, but in any insurance (indemnification insurance) one loss can be claimed from only one insurer. The logic for taking 2 policies is just to increase the cover. Long ago when I took I was told that New India will give a cover of only Rs. 5 lakhs – so I suggested 2 policies of Rs. 5 lakhs – from 2 different insurance providers. Do not know enough about general or medical insurance. I have a New India policy for our family.
Life insurance is not about replacing life. It is about replacing cash flow. So a person who brings in the moolah should be insured – could be the husband or wife does not matter. Cover should be taken for the cash flow that you will miss. If you are 40 years of age and both you and your husband have been earning well and have provided for all your goals, paid off the housing loan, live with 10% of your salary, have a huge portfolio, a spare house…just rethink. You may have outgrown the need for life insurance.
Life insurance is not because you will die, it is because your dependents have to live…and live well. The stupid industry calls it life insurance. If I had my way I would have called it ‘Living expenses insurance’. After all it CANNOT replace life, it can only replace cash flow / living expenses. Think about it.
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