When should you not take out term insurance?


When we talk about life insurance, pure protection term plans are the best bet. They provide adequate protection at very low cost. Take this, a term plan for a 30 year old female non-smoker that covers her to age 60 will cost her around 1000 per month. It costs less than a dinner for two. When purchased even earlier at age 26, the premium will be 20% cheaper. But low premiums shouldn’t be the reason to buy insurance early. When and how much you need insurance depends on your current financial situation and there may be situations where you don’t need life insurance at all. mint tells you three reasons not to buy term insurance.

No dependents, responsibilities: The essence of life insurance is to provide financial protection for your dependents in your absence.

If you don’t have dependents, there is no one to protect you against the eventualities. This could be the case of young employees who are not married and whose parents are financially well off. “Any insurance decision should come down to the severity of the financial burden and the family’s ability to bear that burden,” said Mahavir Chopra, co-founder and CEO of Beshak.

The idea is also not to pass on your responsibility to your loved ones in the event of death. So even if you don’t have dependents but are managing a loan, it’s a good idea to buy temporary coverage for the amount of the loan.

Have important assets: In a scenario where you have accumulated significant assets and have very little or no liabilities, you can skip buying life insurance. Be careful, however, to do this calculation correctly. Assets and accumulated wealth should be able to replace the sole breadwinner’s income after all loans have been deducted. Additionally, if you have any financial goals aligned in the future, such as college for the kids or a spouse’s retirement, those assets should be able to fund those goals.

To save tax: The premium paid for the term insurance policy may be deducted from the Tax relief of 1.5 lakh available under Section 80C, provided the annual premium does not exceed 10% of the sum insured. Many taxpayers rush to buy life insurance for tax breaks towards the end of the fiscal year, even if their financial situation does not require it. You can use the 80C deduction through PPF, ELSS, home loan, etc. instead of buying insurance even if your family doesn’t need it.

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