The reason is same as why you buy insurance for your car, jewelry, office or home etc. There are many other known insurances that we buy and the reason for all these insurance purchases is the same. When you value a thing you want to insure it to make sure if you lose it you are not affected financially.
Still 30% of people who buy term insurance do it to save taxes or out of obligation to someone they know. Almost everyone in India is under pr over insured. Nobody wants to actually have the calculations done as to how much term insurance is optimal for them.
Human Life Value (HLV) is the basic formulae derived to help people ascertain their value in terms of money and then plan for the income replacement via term insurance. Also, considering the inflation and the future increments that a person will be getting.
Why people think term insurance is a waste?
People think it is a waste because the money that they (or their nominee) are getting is after the are dead. In fact this is what they think is the reason whereas actually the reason is that they don’t see any immediate return on their investment hence try to avoid it.Another big reason why Indian’s have never been able to understand the rue value of life insurance is
- Because life insurance till recently was being controlled by LIC of India and being an Government agency they were not very actively promoting life insurance. They had all the 100% of life insurance customers so never felt the need to promote anything.
- India is a rowing economy and people have limited resources / investments. With day by day marketing efforts from the mutual funds and share markets, people were inclined towards investing all their savings into these.