10 Common Reasons Why People Don’t Buy Life Insurance

10 Common Reasons Why People Don’t Buy Life Insurance

Let us look at the common things that people (consumers) say about Life Insurance which keeps them away from buying Life Insurance, and probably exposes them and their family (dependants) to a whole lot of risk.

1. I don’t need Life Insurance: This is reason no. 1 that people give. People don’t give a thought about the fact that eventualities happen; it’s just that they prefer to think that eventualities happen to others and can never happen to them! The issue here is, most of Indians are so uncomfortable even dealing with the thought of them dying someday that they just don’t even want to think about it. I think everyone needs to start by accepting the fact that an eventuality could strike any day. Better to be clinical about this thought rather than emotional, and be prepared accordingly. Moreover, some people think that they earn enough as of now and hence they don’t need insurance. This is probably the most incorrect way to look at it because insurance is for the future, never for the present.

2. I have enough Life Insurance: This is almost always the second reasoning that people / consumers give while talking about insurance. I did a dipstick survey amongst my closest friends who also happen to be financial wizards and fabulous deal makers, and I was shocked to know even their response to my question of how much insurance do they have – the figure that they gave, as an average, was not even equal to their annual salary!! We all think that we have enough life insurance because, here again, the underlying thought is that the person will never need life insurance. There is another spin-off to this – people who have bought any insurance plan ever (doesn’t matter which one) feel that they have bought enough. People confuse Insurance Cover with Insurance Premium paid – one needs to understand that insurance cover can’t be measured just by the amount of premium paid per year.

3. Insurance is a waste: This is a very valid one although for all different reasons – a majority of insurance purchased by consumers is the wrong insurance. It is not insurance in the first place!! It is more of investment (like money back plans, endowment, children’s plans, pension plans etc.) These are investment plans offered by insurance companies and not actual insurance plans. So, if you have invested in these, then you are right – these are all a waste from the point of view of insurance. They don’t serve the purpose of insuring you or covering any kind of risk in a proper manner. Moreover, if you never get to use it, life insurance premium is a waste of money. But, when your family gets to use it in the case of an eventuality, then the money that goes towards paying premium is just a fraction of the benefits that the family would gain from this insurance.

4. My tax planning for the year is over: If you are treating insurance just as a tax planning tool, then you have got it all wrong! While life insurance in India is sold as a tax planning tool, it is just another form of mis-selling. It is just one of the riders that salesmen use to rope in customers, and it is definitely a wrong reason.

5. I have other investments: Yes, you do a lot of other investments and they may be doing really well. But, the issue is, you are still treating insurance as an investment and not as a risk cover. You really need to stop treating this as investment and then you would realize that you don’t need to compare this with other investments. (Please also refer to reason no. 3 above)

6. I don’t know how much Insurance I have: One of the best reasons I have come across – either you have bought insurance for yourself without knowing how much is it worth or someone else (close ones like parents, spouse, friend etc.) have bought it for you and you don’t know  how much is it. Here again, you need to be aware of it to understand whether it is there, enough or not. Another thing that usually happens is, some relatives or friends who are into insurance manage your insurance portfolio, and hence you have no idea as to how much of it do you have. This is the biggest issue in the industry today – insurance agents first fleece their ‘F & R circle’ only – Friends & Relatives. They are encouraged to do so, and they get rewarded handsomely to do so. I have hardly come across agents who do a proper need based analysis for their friends and relatives, and then sell insurance. This is because, actual need based analysis would lead to them to selling very low margin and low ticket products, and hence, their own survival becomes an issue.

7. I don’t understand (what) insurance (is): This is again a big enough reason because a majority of people belong to the non-financial background. Why, even people in a financial background don’t understand insurance properly. Because people don’t understand insurance, they don’t want to touch it at all. Call it a fear of the unknown! After reading all these reports of mis-selling in the media, people tend to think that the product is wrong. Please understand that a product is always created because there is an actual need for it, and it is often sold in a wrong manner. Moreover, it is a valid enough reason (but not good enough to not buy!) because there are so many products and companies to chose from, that one can always get confused

8. I will buy it soon: I have heard it for ages from the same set of people – whenever someone is asked a question on insurance, and they reply that they are just about going to take it, chances are very high that they have been saying the same thing for quite sometime now and have been dilly-dallying on buying insurance. These are the people who understand that they need insurance but are not able to come to a finality in terms of buying it.

9. Someone I know got duped in an insurance product: This is a very regular happening in the insurance industry. There is such a high level of mis-selling that sales people are always duping customers for their own personal gain. CUstomers are always told something and then sold something else. But, this doesn’t mean that the actual insurance product is bad; it just means that someone bought a wrong product or in a wrong manner.

10. I don’t have any liabilities to fulfill: This is probably the most valid of all the reasons given above – don’t want to buy an insurance plan because of no liabilities in the future. But then, this reason is always thinking from the present point of view, and not from a future planning point of view.Plus, there could be always some kind of insurance which would help you save money – Insurance doesn’t only have to be for the risk of an eventuality, it could be for other things also

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