When You Should Not Buy A Life Insurance?
Updated On Apr 30, 2021
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Having a life insurance policy that seeks to efficiently cover your future financial requirements is crucial. However, there are certain circumstances or grounds on which you should not buy life insurance. The following are a list of 5 such instances -
1. Buying insurance to save tax
While it is true that investing in insurance comes with its own share of benefits, buying one simply to save tax is not the right approach. The main idea of investing in life insurance is to secure future financial protection for you and your family even in your absence. Tax benefits should be a concern, but it should not be your decisive factor when you are looking forward to buying a life insurance policy. You are advised to save tax under options and instruments such as the Equity Linked Savings Scheme, Sukanya Samriddhi Yojana which guarantee a high tax return under Section 80C of the Income Tax Act.
2. Insurance as Investment
You must never buy life insurance if your primary objective is investment. Although a lot of insurance companies have a unit linked investment policy or ULIP that is promoted for purchase as well, these products have a very low percentage of returns that are not suited for tackling economic inflation. ULIPs also have a comparatively lower death benefit that is often not enough to secure the future of your nominee. With a high rate of premium, ULIPs are not recommended as investment options. You are advised to buy a life insurance policy for comprehensive financial coverage and invest separately in other options for high returns.
3. Insurance With Non Medical Coverage
You should avoid buying a life insurance policy that comes without any medical coverage. The sum assured for such plans are usually low for a comparatively higher rate of premium. The problem with such life insurance policies is, it does not require you to disclose your pre-existing medical conditions. This renders you unable to claim the insurance cover in case you are diagnosed with a critical medical condition. The insurance company is liable to reject your claim for misinformation or non-disclosure of your medical information and so you should never invest in a life insurance policy that comes without a medical coverage.
4. Insurance as Guaranteed Returns Option
Many people buy life insurances for their guaranteed high returns option, but what they tend to overlook is the fact that most of these policies have a very high rate of premium. You should always look for a premium that offers you complete benefits and a high sum assured with a low or affordable rate of premium, so that your policy does not lapse on account of your inability to pay the same. Life insurances are not the right financial product to reap profit and investment benefits from. Instead of traditional life insurance policies, you can think of other investment avenues and money market instruments where you can receive a comparatively higher return with less investment.
5. Buying A Life Insurance Without Comparing
Buying life insurance without comparing it with other policies is never recommended. If you want a comprehensive and high coverage at a lower rate of premium, you must compare the policy you are interested in with other plans available in the market. Often high coverage insurances have high rates of premiums and you might not get all the coverage benefits that you wish for. Therefore, it is necessary to compare the premium amount, coverage and benefits of different life insurance policies to choose a plan with the best premium rate and services to suit your budget.
These are the 5 instances when, ideally, you should not buy life insurance. Being informed about these aspects will help to invest in a policy that is suited to your budget and offers a maximum financial support as well. People are prone to taking hasty decisions in the domain of life insurances and these points will hopefully aid you to think about your prospects and requirements before hurriedly buying a life insurance policy.
You may also like to read What is the Best Age to Buy Life Insurance?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.