Do All Women Need Life Insurance?

A Financial Planning study conducted some years back presented an interesting inference about Life Insurance in India - we mainly buy it for the wrong reasons! As a collective group, Indians have always favoured Life Insurance as a product over other asset classes. Perhaps the influence exerted by the behemoth LIC has something to do with this fact. Either way, it begs an important question - do all Women need Life Insurance Planning? Let's begin by asking a simple question:

What is Life Insurance and what problem does it solve?
Life Insurance is a risk management tool - period. You could window dress it, strap on savings components and other benefits, but the fact remains that Life Insurance is a cost that one incurs to compensate their loved ones for the financial strife resulting from their potential future lack of their income. Yes, it can help you accumulate savings and achieve your financial goals - but there are better and more efficient ways of creating wealth.

An all too common scenario - single, no dependents, but plenty of insurance!
We've often observed single women with no dependents purchasing life insurance policies at the behest of their Advisors, who have positioned them as 'investments'. They may have purchased these policies for tax savings or simply to deploy their idle savings, but the fact remains that the money could have been better invested elsewhere. As a single woman with no financial dependents, you do not need life insurance regardless of whether you're earning or not!

Do all working women need Life Insurance?
In case of an unfortunate eventuality, Life Insurance can't replace you - but it can replace some or all the income you would have earned, had you lived. If you are a working woman whose income is being utilized towards fulfilling your family's current financial needs or planning for their future goals, it would be worthwhile for you to purchase life insurance to the extent that your dependents are adequately compensated financially for the loss of income.

Does a homemaker require Life Insurance?
Given that a homemaker usually doesn't contribute to the family income, there's no pressing need for her to purchase Life Insurance! Rather, it would be her responsibility to ensure that the primary breadwinner is adequately insured so that her family is safeguarded from the financial strife arising from his potential loss of life. Any liquid surpluses that she may have accrued can be invested into more high yielding asset classes such as mutual funds, stocks, and bonds.

Summing up
Here's a simple thumb rule to determine if you require Life Insurance or not. Ask yourself; will your loss of life impact anybody financially? If the answer is no, divert your surplus funds to different instruments that have the potential to earn better returns for you.