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Real Life Example – Tragic Consequences of being Under-Insured

ignoring life insurance

This is a sad example.

And of a close relative of mine.

Without disclosing the real identity here, I hope this example can help convince those – who still have doubts about having a big enough life insurance cover.

Almost a decade back, one of my relatives died unexpectedly at a not-so-old age of 44 years.

Apart from the emotional upheavals that the family had to go through, there were few other big problems:

  • He did not own a house and was staying on rent in New Delhi – a costly city.
  • He was the sole earner of the 4-member family.
  • Son was 16 and daughter was 9 years old (both studying and years away from earning themselves)
  • Wife had never worked before.
  • Sadly, he did not have much savings.
  • Worst, he did not even have a decent enough insurance cover. (Just a couple of lacs in useless endowment policies. No cover from his private employer too).

Today after almost 9-10 years of his death, the situation is still not great. The family of three still stay in a rented house, the son has only recently started earning decently and daughter is yet to complete her education. After death of the person, his wife did try to seek employment but it did not work out.

You might be thinking about how then they were able to sustain for so many years? Lets just say that our extended family pitched in and did what was necessary. But I hope you got the picture.

Now read through the list of points (i.e. problems) above again.

Read it?

You would agree that it was an extremely sad and all the more scary situation to be in.

I completely understand that there is no point trying to look for faults in past action of people. But there are others that need to realize the importance of life insurance today.

How different would have been the family’s situation if this relative of mine was properly insured?

A lot different…

Maybe, the money received from insurance could have been used to purchase a house (no future problem of rent). Or it could have helped in paying the exorbitant fees of the children. Or it could have helped provide for everyday expenses of the family. Or all of these!

That is what insurance is there for. Isn’t it?

Its not for tax saving. Its not for investments. Its not for savings. It is there to help the family after death of the insured person.

I know this example is not uncommon. Lacs of people die every year without adequate life insurance. Sadly, it is their families that have to bear the consequences.

Many feel that a small cover (of lets say Rs 5 or 10 lac) is enough. In a way, they are saying that having an ‘inadequate’ life insurance is still preferable to dying with zero life insurance.

I agree. But not completely

When one can easily buy a big enough cover (Rs 1 Cr life cover can be bought in less than Rs 10,000 annually), there is no excuse to having an inadequate life cover.

If you are well covered and know how much life insurance is right for you, then good for you. But if not, then you are not being responsible to your family. No excuse whatsoever can justify your stand of being under-insured.

Just try visualizing a scenario of your own death – imagine the issues your spouse, kids and family will have to face just to maintain their current life style and achieve other financial goals.

You will feel like you have been punched in the face.

Taking care of your family even after your death is your responsibility (atleast to an extent). Don’t shirk it.

PS – If you know someone who still doesn’t believe in life insurance, do share this article with them. The more people read this, better it is.

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11 comments

  1. Without disclosing the real identity here, I hope this example can help convince those – who still have doubts about having a big enough life insurance cover.

    5 years back one of my relatives died unexpectedly in bike accident. he was 42 with 2 kids. wife was not working

    he used to read 25 blogs every morning and got insured for 1cr term plan online from one of very famous provider all bloggers and pink papers were suggesting. he had dotted every i and crossed every t on the forms.

    Today after almost 5 years of his death, the situation is still not great – insurance claim has not been given

    You will feel like you have been punched in the face.

    I know this example is not uncommon. Lacs of people LIVE every year with 1 Cr life insurance. Sadly, it is their families that have to bear the consequences.

    Getting insurance claim even after your death is your ghost’s responsibility . Don’t shirk it.

    1. Hi Ajay, Thats very disappointing story..whats the point of insurance then.. if they are not going to honor it.

      Can you please tell whats the reason for rejection ?

      Thanks,
      Shyam Singh

    2. Hi Ajay

      This is sad indeed. Insurance companies will definitely not give the money on a platter. In case of the story you shared, the worst-case scenario has played out sadly.

      But then, having a policy increases the chances of getting it honored when claim arises. But not having one will definiteily not help.

  2. Given hospitalization costs today, I would say you need Health Insurance along with Life Insurance. There seems to be a need for a change in mindset of treating Insurance as an investment to that of risk coverage. You insure against the risk of an event that may or may not happen. If the event does not happen, you are lucky. If it does, at least you will not be scrambling. That is what it is and that is how it should be viewed.

    1. Agree with you KPL. Need to insure for following 3-4 scenarios:

      – Death
      – Hospitalizations
      – Disability
      – Critical Illnesses

  3. I am a top end customer (as per classification) with some banks. Been provided with RM and lots of benefits touted.

    But reality is different. I have very simple and minimal requests to the bank and everything gets delayed, complicated and no clear communication from RM, Service Manager or even their bosses.

    I am not a newbie and well versed with banking and tax rules. Every time I need to throw my weight to get the issue resolved.

    Let me bit specific. I have not taken any loan and my requests to the bank are like cancellation of FD, process the nomination or reKYC or clarification about some deduction.

    This experience made me not to trust insurance companies. We need to get data about how many terms plan claims are settled which are difficult to comeby. This is what I have learnt over a period of time in professional career. I can reject any application, report, design, invoice etc citing innumerable number of reasons if I want to. I am sure Insurance claims processing dept is capable of doing the same and they can find million reasons to reject claim.

    Needless to say I have not taken any insurance.

  4. Correct Krish..in case of death there can be numerous reasons to reject the claim. Also the nominee may or may not have that much strength to fight it out in IRDA (there are many things to fight for that time already).

    One should work on increasing the networth and create a second source of income (real estate is best bet in that case).

    Thanks,
    Shyam Singh

  5. I don’t blame the husband. He did the best he could. Being the sole bread earner in a family of four in this day and age is an uphill task. If he had dependant parents too, then we are looking at one guy providing for 6 people. Do you think this is a joke? After all that the guy is expected to pay for a 1 crore life insurance policy? Give me a break.

    I refuse to believe the wife tried but could not get a job. If the desire is there, anything is possible. If she couldn’t get a job, she could have opened some small business. Poor people somehow survive too. Kids can go to government school if need be. But where is the incentive to tough it out when asking the relatives for money is far easier? I am speaking from experience here because I have a couple of relatives like this who would rather ask for money than earn it themselves.

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