First Life Insurance. Then Invest.

Imagine you are the father of a newly born daughter. And since your spouse is a housewife and your parents are retired, you know you are the only one bringing money on the family’s table.

Given your responsibilities and understanding of ‘need to start investing early’, you have recently taken steps to begin saving properly for the important financial goals like your daughter’s higher education, her marriage, your first house purchase downpayment, buffer for medical contingencies of parents and of course, your retirement.

This is your story up to today.

Now let’s see a bit of the future. Not very distant future but just what happens tomorrow.

So here’s your tomorrow – You leave the house in the morning to go to your workplace. But you don’t come back from the office in the evening. And you will never come back from office. Why? Because you met with an accident!

A sad end to your story.

But let’s look at it from the family’s perspective.

Your wife’s husband, your daughter’s father and your parents’ only son has died. We all are feeling sorry for them. Even you would be feeling that way in heaven.

Let’s now give a thought to how they are going to manage their lives after you?

You, before dying had started saving for a few financial goals. But since you had just started, there isn’t enough money saved up for the goals.

So…

What about family’s daily living expense (like food, rent, utilities, medicines for parents, etc.)? Maybe your wife will now have to look for a job but since she was a housewife, it would be difficult for her. The parents are already retired so they can’t work now. Luckily, they get a very small pension they use for themselves.

What about saving for your daughter’s higher education and marriage? Nothing. The savings are meagre as you had just begun. So maybe, your wife’s ability to earn will be the deciding factor about how much can be saved for the daughter’s future. Or maybe, your daughter will just take an education loan for her education as her father died early and couldn’t save money for her future.

What about purchasing a house for the family as they are still living on rent? Out of question for now as the first priority for your wife is to earn money for regular expenses of the family (on food, utilities, rent, etc.). Buying a house is a distant dream for now.

What about having some buffer for parent’s medical contingency? That too is not possible now due to lack of savings and no source of current income for the family. If god forbid something untoward were to happen on the medical front, there is really no way of knowing how the money will be arranged for it.

Of course, a few lakh rupees are there in your provident fund which can help the family get over the shock and take care of expenses for the next few months.

But what after that?

Think about this situation for a few moments and then read ahead.

……

It is indeed sad that you are dead.

But that doesn’t hide your mistake – that you did not get yourself properly insured.

And you were not alone. Most people don’t expect to die tomorrow. And as a result, don’t give importance to buying insurance. Even when they do buy, they buy it for tax saving and its an inadequate amount which leaves them uninsured and their family open to the risk like your family (as discussed in earlier example).

Just imagine an alternate scenario where you had purchased life insurance of Rs 1 crore before dying. Imagine how easy family’s life would have become if they had received Rs 1 crore in the sad event of your death.

No doubt money cannot replace you (remember you are dead in this example and discussion). But if death is to happen, it is better to have money in place to help the family in your absence.

Right?

It’s a no brainer actually. Think about it.

And this is exactly why purchasing life insurance should be your first priority. Or to put in other words, first purchase insurance and then think about investing.

And since simple term life insurances are so cost-effective (you get a cover of Rs 1 crore for less than Rs 10,000 annual premium), there really can be no reason for not buying insurance for anybody now. Remember, by life insurance, I mean only term insurance and not endowment plans or money plans (read why).

A plain term life insurance is enough for all your life insurance needs.

Here are some FAQs on Term Insurance to help you better understand it. And by the way, these days there are different types of term insurances to choose from. So you can find a term plan which is ideal for your unique needs and situation.

And there is another important thing to understand.

Just buying any life cover is not a smart thing to do. Imagine taking life insurance of just Rs 5 lakh. Do you think it would be enough to take care of the family after you? Ofcourse not! You need to first assess your and family’s situation correctly and then calculate how much life insurance to buy?

Hopefully, if you are still uninsured or underinsured, this discussion will wake you up.

When you buy life insurance, it is not for yourself. It is for ensuring the financial continuity of your family’s life.

Money cannot replace you. But without money, you are smart enough to know how bad things can be for your family. And you would never want it.

Luckily, managing this risk (of the family facing financial troubles after your unexpected death) can easily be taken care of by purchasing the right life insurance plan. And it’s not very costly as I mentioned earlier. So I don’t think you need any further convincing about why one should think of life insurance first. Unless ofcourse you are too rich to even need life insurance.

The good thing these days is that many people are realizing this. In addition, there are proper campaigns being run to highlight the importance of purchasing life insurance. Sabse Pehele Life Insurance is one such push to convince people to make purchasing of proper life insurance a priority in life. Even before saving or investing.

All said and done, if you still need some push, then I suggest a small exercise.:

  • Take a piece of paper and a pen.
  • Try to visualize your family and how they are managing their lives in case you were to die today.
  • Write it down.
  • You will clearly get the message that I am trying to highlight here.

If you still haven’t, then get yourself life insurance as early as possible. It’s not a waste of money. It’s a backup plan for your family. And it’s worth paying for.

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