With an increase in the number of accidental deaths, premature deaths and rise in diseases not having a life insurance is embracing risk. As far as our lives are concerned you may not be much worried but shouldn’t you be worried about the financial future of your loved ones? Or will you start caring only when it’s too late? Subsequently we end up purchasing plans that do not offer proper coverage.
You need to keep in mind that life insurance is not for you but for your loved ones.
Underinsurance is when you purchase a life cover with a less sum assured amount that wouldn’t be sufficient enough to financially protect the future of your financial dependents.
You can definitely consider any life insurance cover which is less than 1 crore is ‘underinsurance’
Reasons why people are underinsured:
- They believe in the myth that insurance is only for tax exemption.
- The policyholder simply looked at the premium rate but didn’t calculate the amount his/her family would actually require in his/her absence.
- Wrong decisions/ purchase of wrong product. People may sometimes purchase expensive insurance which they could not afford later or are unable to continue paying high premium.
Is being underinsured harmful?
Once an individual purchases life insurance, he has a delusion of getting a secured future.
This carefree behavior might put an individual in a terrible situation if something goes wrong. If you realize that the life insurance cover you opted for is unable to pay debts and not able to take care of your financial responsibilities then you need to act at that very immediate moment.
You should calculate how much insurance cover you need to have a secured future. The thum rule is that your life cover should be atleast 10 times of your annual income.
Now that you know if you are under insured or not, it is time for you to take the step for secured future. The best policy to have, the one with highest cover at the lowest premiums is a Term Insurance Plan.
Term insurance helps you in securing your future in a most pocket friendly way and also nullifies the mistake you did while purchasing the wrong insurance due to sheer ignorance about the same.
Underinsured individuals are already paying premium for a policy, by purchasing term plan one can increase the coverage amount by increasing sum total.