Should Term Insurance Be a Right or a Necessity in India?

Term Insurance: A Right or a Necessity?

Insurance should be a right so that everyone gets basic protection for their loved ones. But in reality, it is a necessity that people have to buy on their own. In India, most people focus on saving, earning, and investing, but ignore financial protection. A single hospital bill or a sudden loss of income can distort your savings, which is why term insurance becomes essential in everyday life.

What is Term Insurance?

Term insurance is a simple life insurance plan that provides financial protection to your family for a fixed time period. If you pass away during the policy term, your nominee receives a lump sum payout. It does not provide maturity benefits or returns; its main objective is protection. Because it's pure insurance, premiums are relatively low, enabling you to get high cover at an affordable cost. You have to pay a small premium amount today to ensure your family's financial stability if something happens to you.

Important Clause: Suicide Clause

Many people avoid taking term insurance as they do not understand plan clauses properly. Most term plans have a suicide clause: if the policyholder dies due to suicide within 12 months from the inception date, the claim payout may be limited according to the policy conditions.

How Can Term Insurance Be a Right?

Treating term insurance as a right implies that every individual, specifically the earning population, should have easy access to standard life cover. In short, it ensures that if something happens to the earner, the family is not financially helpless. India has taken initial steps towards this through low-cost government-backed insurance schemes like:

• Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) – Offers life cover of ₹2 lakh at a very low annual premium.
• Pradhan Mantri Suraksha Bima Yojana (PMSBY) – Provides accident cover up to ₹2 lakh.

How is Term Insurance a Necessity?

In real life, a term plan is not optional; it is a financial necessity, specifically if someone depends on your income. Here's why:

• Family Depends on Your Income

  For most households, one or two members are the primary earners. If that income stops suddenly, the family's complete financial stability is affected. Daily expenses, household costs, and school fees need to be continued, even if there is no income.

• Loans and EMIs Do Not Stop

  Whether it is a home loan, personal loan, or car loan, liabilities remain even after the earner's uncertain demise. Without proper coverage, they may struggle with EMIs and be forced to sell assets.

• Increasing Cost of Living

  Expenses are continuously increasing. What seems sufficient today may not be enough tomorrow. An adequate plan allows your family to cope with future financial needs and inflation.

• No Strong Social Security in India

  Unlike some countries, India does not have a strong system that financially supports the family after the death of the earning member. There is no guaranteed income replacement from the government. This makes personal planning crucial.

Real-Life Examples: With or Without Term Insurance

With Insurance

Rahul, a 35-year-old private employee, earns around 80,000 rupees per month. He lives with his two children, wife, and ageing parents. He also has children's school fees, a home loan, monthly household expenses, and future goals such as savings and higher education. Rahul buys a term plan for 1 crore rupees by paying a small monthly premium.

Without Insurance

If Rahul had no insurance cover, his family would struggle to pay EMIs, and his savings could get exhausted quickly. His children's education may be affected, and the family might need to borrow money or sell assets. At a time of emotional stress, the family would also face financial uncertainty.

Reasons Why Indians Still Avoid Term Insurance

Many people in India delay or avoid buying term plans, despite their importance. The reason behind this is often emotional, psychological, or because of a lack of awareness rather than affordability.

• "Nothing Will Happen" Mindset

  Many people believe they are young and healthy, so insurance is not necessary for them. Because insurance, according to them, deals with uncertainty and death, people avoid thinking about it.

• Lack of Awareness

  Many people still do not clearly understand how term insurance operates. Some think insurance is solely for tax savings, while others confuse term plans with savings or investment plans.

• Focus on Investments and Savings

  Most Indians prefer investing in property, gold, mutual funds, or fixed deposits. While these are essential for wealth creation, they may not immediately support the family financially after the sudden loss of the earning member.

• Delaying Because of Cost Concerns

  Some people feel premiums are expensive. In reality, a term plan is one of the most affordable ways to get high coverage, specifically when purchased at a younger age.

Conclusion

Term insurance should be considered a necessity for individuals. Government-backed plans allow even the financially weaker section of people to afford insurance at a very low cost. Indians avoid buying term insurance because of the misconception that "nothing will happen." This keeps their and their families' future at stake. So, buying insurance at an early stage is the best choice to make.

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