With the right policy, life insurance is an excellent tool to ensure your family's financial security in case of your untimely demise. While there is a definite case for being insured (as our cover story emphasises), not everyone needs a cover. Hence, it's important that before buying a policy, you analyse why you need to be insured and who, if any, will be affected financially by your death. If a situation or a lifestage doesn't call for a cover, you should not be forced into buying one. Here are the specific circumstances that don't necessitate a life insurance policy:
If you have no dependants: A life insurance policy is essentially meant to replace the income of the policyholder when he is no more. This implies that if a person does not have financial dependants, he probably does not need a life cover.
If you have saved for dependants: If you have salted away enough to support your dependants, say, a spouse, after your death, why pay the premium for a life insurance policy? This does not mean that you should discontinue an existing policy, just that you shouldn't be talked into buying a new one by an overzealous agent.
If you just want to save tax: While insurance policies offer tax benefits, it is not reason enough to subscribe to a scheme. People habitually buy life insurance as part of their income-tax planning, whereas there are more lucrative investment options for saving tax than an insurance policy that gives low returns.
If you want to cover spouse/kids: People tend to buy life insurance for their unemployed spouse or children just because such policies exist. Neither a homemaker nor a child has an income to protect and there is no benefit in buying such a policy for them.
Cost vs benefit evaluation: The cost of life insurance is based on actuaries, which is the calculation of risk based on age- and health-related parameters. The risk for an insurance company increases as a person ages. This is why the premium for a healthy 21-year-old nonsmoker is low, while a man who is in his 50s and smokes will pay a small fortune to buy the same coverage. So, if you are in the high-risk category, you should evaluate whether the high premium is worth it, depending, of course, on the value of your assets. The bottom line? Don't buy a life cover if you don't need it.
You don't need insurance if: