In Mahabharata, the great Indian epic, there’s a story of a Yaksha asking some intriguing questions to Yudhisthira. The story goes like this….
One day while living in exile in the forest, Yudhisthira finds that while attempting to drink water from a lake, all his brothers have been killed by a mysterious Yaksha (a celestial entity). When Yudhisthira arrives the Yaksha challenges him to answer all his questions or else face the same consequences as his brothers.
One of the questions was what is the most wonderful/surprising thing in the world and Yudishthira answers that the most amazing thing is that even though every day one sees countless living entities dying but no one can imagine him/herself taking that last journey!
I guess that’s why even though Insurance is an important financial product, people have a natural tendency to avoid it. Infact most of us cite the agents pestering and tax issues for taking insurance!
If you ask me, the following form the crux of my thoughts on insurance:
- First of all, you should never buy anything but term life insurance. Insurance as an investment is a great investment for the insurance company but a terrible one for you. If you want insurance, get insurance; if you want to invest, buy an investment. Don’t mix the two!
- Second, if you have no dependents and no spouse, don’t buy life insurance. Ever. Don’t let a salesman talk you into it.
- Next, the more net worth you have, the less insurance you need. This means that before you start thinking about life insurance, know what your net worth is. This is an important number for figuring out how much net worth you’re going to need.
Cross posted on Insurance Information in India which is the first blog off the Blogs201 stable