The next thing you must have after 'Roti, Kapda aur Makaan'

We live in a world where chances of the possibilities are always probable. However, our mind always console our heart that the improbability of the impossible is a certainty. As we continue to live conveniently in a world of denial, Murphy’s law states "anything that can go wrong, will go wrong".

I am a Financial Consultant by profession. One of my Key Responsibility Area and Ethics is Advisory : Prudent, Practical and Pragmatic Financial Advisory. However, more often than not, I come across individual, albeit successful and wealthy in their means, are utterly lackadaisical in the approach of safety, prevention and protection of their life and health. There lies acute apathy towards the realization of the probability of financial constraints that may arise for the family, spouse and dependents in the event of their unfortunate absence. A complete contrarian to Murphy's law prevails in their mind. 

Nevertheless, there lies a very simple solution for protection from financial loss, in the name of Insurance. Insurance that is of one's life and health must come after 'Roti, Kapda and Makaan', in Indian parlance. 

While countries like United Kingdom and Japan have 11% Insurance penetration, India lag far behind with less than 4%. Many people don’t purchase enough life insurance to cover their needs. Of those that do, many end up making critical mistakes and buying insurance that is not optimal. Forget about India, in United States itself, according to the Life Insurance and Market Research Association (LIMRA), more than 30 million Generation X and Y households surveyed reported that they needed more life insurance. 

These are sobering figures. The situation is even more grave in India.

However, the same survey found that most of us believe life insurance gives people “peace of mind.” Of those who have had a positive experience with life insurance, 80 percent indicated that the life insurance industry plays a “critical role” after the death of a loved one.

In general, people are also confused about insurance. The main reasons people don’t buy insurance is because they believe they can’t afford it and they have other financial priorities. However, the survey also showed that consumers seriously overestimate the cost of life insurance by as much as threefold.

Consumers find insurance confusing. Of those surveyed, 12 percent couldn’t decide what type of life insurance to purchase, 10 percent were concerned about making the wrong decision and 8 percent simply gave up because of a lack of knowledge about insurance.

The confusion in their mind is not without reason. In India, Insurance has been completely wrongly sold. Insurance here is clubbed as a combo product of Insurance and Investment. The fact is that a combo of Insurance and Investment can never reach its destination of purpose, neither as Insurance, nor as Investment. On the contrary, due to the reason of this combo, the Insurance per se, which actually should have been the only purpose of the product, has become expensive, resulting in consumer disinterest and being the culprit for such a low penetration of Insurance among Indian household.

The only Insurance one must and should have is of pure Life Cover and Health Cover. Rest set aside the Investment part for pure Investments only. Be it Fixed Deposits with Banks or Post Office, or Gold or the best in Mutual Funds for the prudent risk takers.

Pure Life Cover comes relatively  cheap. A Rs.25 lakh Life Cover for a 30 years old male, can cost around Rs.6000 annually. The cost can be just Rs.3000 a year, if one goes for only an Accidental Life Cover. Conventional combo Insurance on the other hand costs no less than 100 to 200 times for the same cover. So combo insurance products must be ditched for the sake of sanity. Go for pure Insurance only.

India has the highest number of road deaths in the world that has a serious economic cost, According to transport ministry study, the country loses 3% of GDP every year because of road accidents and fatalities. Data published by the ministry reveals scary figures :

• More than 5 lakhs road accidents happened in 2015, resulting in 1.5 lakhs deaths due to it. 
• 57 accidents occur every hour, in which 17 people die per hour.
• In each accident, 29 people are killed on an average.
• Two-wheelers the most fatal mode of transport, counting 32% of the total death, followed by 17% in cars/taxi/vans, 11% in Trucks and 10% pedestrians.
• Drivers cause 77% accidents, while driver of other vehicle causes 5%.
• Uttar Pradesh has maximum of all deaths at 12%, followed by 11% in Tamil Nadu.  

Data analysis of mortality of Indians show, that accidental deaths counts among the top 10 causes of deaths. In fact among the males of age group of 15 to 29 years Motor Vehicle accidents is the largest cause of deaths. 37% of Indian's Paramilitary forces are killed due to road accidents as compared to just 8% due to terrorism.

While the government is taking responsive initiatives to check and prevent road accidents, the above figures are reason enough for every earning individual to buy at least an Accidental Insurance Cover, along with a Health Insurance. It should not be either-or. It must be both. While Health Insurance covers financial loss arising due to hospitalization for whatever reason, Accidental Insurance covers financial loss arising due to either accidental death or disablement, be it permanent or temporary. It even covers financial loss for undergoing medical treatment for accident victims.