Life insurance aims to replace lost income

A judicious mix of term, endowment/whole-life and annuity insurance policies can meet the most sensitive goals of life.

There are two types of financial goals in life — insurance and investment goals. Certain goals can be better realised through insurance. All sensitive goals of life fall under this category. The risk of dying prematurely, leaving behind dependents with no or little stable income is one such risk. The risk of becoming physically or mentally incapacitated resulting in loss of earning capacity is another risk which can affect the standard of living of a family, education and marriage of children and more.

These financial risks can be managed by various life insurance/annuity products. A judicious mix of term, endowment/whole-life and annuity policies can meet the most sensitive goals of life.

Investment goals, on the other hand, can vary from individual to individual. It can be buying a luxurious house at a prime location or buying a premium segment car or going for a vacation abroad. There is nothing wrong in dreaming big. People have started to believe that by investing in areas which promise high returns, it is possible to fulfil some dreams of life. They are willing to take risks for the possibility of earning high returns.

Insurance goals

With the Indian economy projected by IMF to be the fastest growing major economy in the world this year too and to become a $5trillion economy by 2027, Indian insurers will have to constantly innovate with new products across health, motor, travel, home and commercial insurance segments to ensure country’s long-term wellbeing and prosperity. There is a clear need to shift from product-centricity to being more customer-centric and insurers that rise to the occasion to provide the highest personalization will remain relevant in the eyes of the Indian consumers.

Though there is a common perception that life insurance policy is profitable only in the event of death, it is the result of inappropriate positioning of life insurance in the financial market by the insurers. For the better understanding of the insuring public, we can say that no one makes a windfall when someone dies. Life insurance is a mechanism to arrange replacement of lost income.

It is designed to give the family some money which enables it to reach the insurance goals of the deceased life assured. Again, if the life assured is alive on the date of maturity, he has not incurred any loss. For one, he has got back the sum assured either in lump sum or in instalments along with a bonus which is pretty decent. Secondly, he has enjoyed the risk cover for a long period which must have given him reasonable peace of mind.

The insuring public needs to understand the value of this peace which life insurance products alone can generate in the world. In India, insurance goals are sometimes undermined and disproportionately larger emphasis is given on investment goals. We have to value attainment of insurance goals if we want to live and work with peace and dignity.

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