With a rise in the sale of term life insurance plans, Indians are believed to be moving towards “panic buying” amid growing concerns about the COVID-19 pandemic.
You might have to revisit your coverage to ensure that the policy matches the financial protection requirements according to your current times.
Since the onset of the COVID-19 pandemic in the country, the term life insurance industry is experiencing something of a renaissance. In the last 8 months, customers have been purchasing term life insurance in elevated numbers, just when thousands of Indians began testing positive for the novel coronavirus. The result seems logical given the core objective of term life insurance; a financial backstop in the event of your sudden demise. If the breadwinner of a family dies unexpectedly due to the COVID-19 infection, term life insurance will plug the immediate gap in household income.
“Panic-buying” – The New Trend?
Insurers report that the business of term life insurance has witnessed a traction of 40 per cent in the last 6 months as the pandemic has forced the importance of financial protection to the top of the mind for consumers in a way like never before. Moreover, media reports filled with stories of thousands of people being infected with the pandemic and tragic loss of life each day, people are increasingly aware that good health and long life are not givens that they can take for granted anymore. While it is good that more and more people are buying term life insurance to financially protect their families, there is a flip side to the story. With a rise in the sale of term life insurance plans, Indians are believed to be moving towards “panic buying” amid growing concerns about the COVID-19 pandemic.
This is supported by a recent Swiss Re report that states that Indian consumers are second most active in the Asia-Pacific region in seeking insurance during the COVID-19, driven by financial concerns. The report further elaborated that, “Indian consumers are among the most active and engaged when it comes to insurance, trailing only China when it comes to researching new policies and satisfaction levels, proving the potential and importance of insurance in this growing market.”
Things May Go Wrong
Well, while it is important that you invest in the right term life insurance policy to financially protect the future of your loved ones, “panic-buying” in insurance may cause unnecessary wastage of money. Moreover, it may cause undue anxiety and stress if you realise that you cannot file a claim when the need arises, or there are delays in receiving your insurance proceeds just because you did not buy the right term life insurance policy. A few months back, one such incident happened with the family of Mr. Ramesh Mathur – 38, who bought a term life insurance plan in the month of March – just when the pandemic strike India. Out of anxiety and stress to financially protect the future of his dependents, Mr. Mathur bought a term life insurance plan with Rs 50 lakh sum assured in a hurry without evaluating his actual financial needs. Unfortunately, Mr. Mathur died due to COVID-19 in the month of October and on his demise his family received a sum of Rs 50 lakh.
However, this amount was not sufficient to take care of the financial needs of the family as Mr. Mathur had a home loan of Rs 35 lakh which had to be repaid and also he had two kids aged 9 years and 5 years, and a wife who were all dependent on him. With that Rs 50 lakh, his wife had to repay the home loan, a part from taking care of the financial needs of the kids that included their education, marriage and daily lifestyle expenses which was practically not possible without asking for financial help from other family members. The point is, the core reason for which Mr. Mathur bought the term life insurance plan – financial protection of the dependents – could not be served. During the ongoing pandemic and the immediate need to protect your family under a robust financial protection plan, there are many people like Mr. Mathur who are doing the same mistake – “panic-buying” term life insurance.
Be Thoughtful of What You Plan to Buy
Just like wearing a mask, washing hands frequently and maintaining social distancing are the best defences against COVID-19, evaluating your financial needs, buying the needed add-ons and taking coverage until the right age are some of the best defences against “panic-buying” of term life insurance. During this period of heightened financial security anxieties, it is important to set aside some time to review your financial value and assess your financial needs in the years to come.
This is because your financial needs change with your life stages and it is important that you protect the future of your loved ones with the right sum assured when you are not around to take care of them. In order to make sure that what you are planning to buy to protect the financial future of your loved ones is still relevant after several years, it is important to invest in the right product. One must never forget that financial protection of dependents using term life insurance is the only one key aspect of the right financial planning.
(The author is CBO-Life Insurance, Policybazaar.com)