Whenever we recommend life insurance, we always prefer a pure term insurance called the Term Plan or Term Insurance Policies. Can there be a scenario when one does not require life insurance? Can there be reasons When NOT to buy term insurance policy? Let’s explore this scenario today.

Pure protection term plans are the best products to buy life insurance for a large amount at a low cost. But yet they have a cost.

This cost increases manifolds in later years of life. Even a healthy guy of say 45 years will have to shell 3 times the amount a 25 years person will incur.

When NOT to Buy Term Insurance Policy …

… and save this cost?

After analyzing the situations, we recommend 4 situations When NOT to Buy Term Insurance Policy is justified.

When Not to Buy a Term Insurance Policy?

Situation 1: When you do not have dependents, liabilities

The important aspect of life insurance is to cover the economic burden the family needs to undergo when the main breadwinner is no more.

So, the benefit of life insurance plan is derived by surviving family members.

It is common nowadays to be independent and have no extended family. Many males & females prefer not to marry and live alone. Sometimes by separation or god’s will, a person is forced to live an alone life. His death may not be a burden (economically) on anyone.

One can choose to live a life without insurance in this circumstance.

The point to note is maybe you are alone say till 40 years. What if you start a family after that? The term plan – say after 40 will be costly. Hence you need to think realistically about this and decide.

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Situation 2 – No Liabilities

One of the reasons to buy a term plan is to not pass on your liabilities to your family in case of your demise. This can be a home loan or business loan.

It is normally a recommendation that you buy a term cover equivalent to the loan amount. But in case you know you are self-sufficient and will not require loans to support living expenses, you may not have a Term Plan.

Situation 3 – Have or made significant assets

One can build assets by investing, or by inheritance. If a person’s net worth has exceeded, his liabilities are nil or very less compared to assets amassed, and one cannot have term life insurance.

How many assets? It is a personal call. It is better if one calculates this using expense & income adjustment methods so that he is sure of his thinking.

Also, problems come when personal assets like homes where family lives are valued more than other disposable assets. Also one needs to take care of liquidity aspects. Assets like financal are liquid and can help the family in need. But what about Property? Is it so liquid? What if the property is family owned and you have a part of the ownership?

Situation 4 – To ONLY Save Tax

This is quite common that one rushes to buy insurance when tax filing deadlines arrive.

Term Plans of any other insurance are not required when you just want to save tax.

To save tax one can have various options like PPF, NPS, NSC, ELSS, etc.. so one must not buy plans which are commitments for many years to come.

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Situation 5 – To Make or Help a Friend

Many times, relatives or close friend approach and say “help me … I just need one policy to complete my targets”…

Most of these policies are stopped or terminated in the end.

This is the wrong way to sell & buy insurance. It is need-based.

You know each proposal has a history. You are creating paper records of information that is personal about your situation, income & health.

Other reasons When NOT to Buy Term Insurance Policy:

When a friend buys a new policy and claims “mine is better than yours”.
When you think a term plan will give you an excuse to neglect your health. Term Plan cannot replace you. So, maintaining good health has nothing to do with increasing your cover or not.
When you hear – Term Plan offers good returns. No, they do not. Most are without a refund of premium and ones with premium refunds come with returns in the range of 3-5%.
A gift to the family: There are better options to gift your spouse or kids. Offering your family a favor or buying a term plan as a gift is a terrible way of expressing your love. Term Plan is your responsibility like the care you give. You cannot gift it on an anniversary as the stupid commercials on TV tell us to do.