Do I need Life Insurance ?

What is Life Insurance?

There are many complicated definitions about Life Insurance, but in subtle and simple terms, life insurance, as the name suggests is to economically , insure a life. This means that if a person whose life is getting insured, dies because of any unforeseen circumstances, the insured sum is handed over to his nominees as per the insurance contract between the two parties.

Is it necessary to have Life Insurance?

Family Security is the key motive behind life insurance. Though Vehicle Insurance is mandatory in India, some critical elements to be insured like Health Insurance and Life insurance are not. This discretion does not mean that we should not get our lives insured. In most cases, my recommendation would be to make sure that the family is secure, at least from an economic point of view, under any eventuality.

What kind of Life Insurance should be done?

There are so many insurance products available in the market that it can definitely become confusing on what insurance product is right for which family member. The book "From Rat Race to Financial Freedom" digs deep into what kind of insurance products should we buy to have maximum security with min investments and what should be the amount of insurance for each family member. There is logical reasoning and common sense in buying life insurance but most of us buy the wrong insurance products at the wrong time and pay unnecessarily high premium. The book will explain you what you need exactly.

Why do we do Life Insurance?

The whole objective of doing life insurance is to make sure that that the family whose bread earner has been lost unexpectedly, does not suffer at least on an economic front and the family is able to take care of its financial needs to a large extent in the unfortunate eventuality of the bread earner's death.

Whose Life should be ensured?

Since the aim of life insurance is to maintain continuity of incoming money to the family with or without the presence of the income earner, it has to be the person(s) in the family who is contributing to family income whose life must be ensured.

Does a Financially Free person need Life Insurance?

That was a very interesting question that came up during one of the discussions on my blog. Once you become financially free, you are no more a source of income for the family. Sounds difficult to gulp, but this is the fact !!. Yes, this is the fact that a financially free person is not a source of income. This is exactly that person comes out of the Rat Race. The source of income in such a case is the portfolio or the nest egg that has been built. It is the nest egg that is generating family income and not the person who created the nest egg. Thats the magic of financial freedom. 

In such a case, if something needs protection or security, it has to be the nest egg and not the person who created the nest egg. In nutshell, if you are financially free, your family is not dependent on you trading your time with income for the family and hence you need not get any life insurance done for yourself !!. This happens to be one of the bi-products advantages of being financially free !!

Post your comments on the blog if you have any queries and i would be happy to answer.

Cheers

Manoj Arora

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