The Psycology Behind Delaying Term Insurance—And How to Overcome It
While increasing financial literacy among Indians, many delay purchasing a term policy even when it is one of the easiest and cheapest instruments to provide financial security to their family. The catch? Everybody knows it's crucial, but procrastination prevails.
But what is causing this procrastination? Why are responsible, educated individuals putting off making such a vital decision? To find the answer, we need to venture beyond premiums and numbers into the realm of the human mind.
Let's examine the psychological barriers that prevent individuals from purchasing term insurance, and how we can shatter them to make wiser, more confident money choices.
1. Optimism Bias: "It won't happen to me."
One of the most powerful psychological influences at work here is the optimism bias—the tendency to think that bad things will happen to someone else, not you. Folks in their 20s, 30s, and even 40s often feel they are too young, too healthy, or too safe to require coverage.
This attitude is particularly common in India, where the support systems within the family are robust. Many people feel that if something bad were to occur, somehow the family will manage. But the presumption can have disastrous results, especially if you are the only or main bread earner.
Overcoming it:
Switch your focus from yourself to your dependents. Ask yourself: "What if something happens to me tomorrow? Will my family be able to keep their standard of living, pay debts, or support my child's education?" This cold, harsh reality tends to motivate action.
2. Temporal Discounting: The Present Trumps the Future
Immediate gratification is what most individuals prefer over long-term security. This is temporal discounting in behavioural economics. Spending on vacations, electronics, or lifestyle enhancements is a more tangible experience than investing in a term plan that may never be "used."
Furthermore, since the return on a term policy materializes only in the event of death, it is a far-off, intangible occurrence. This absence of immediate satisfaction leads to individuals putting insurance buying low on their priorities.
How to overcome it: Select a best term plan with return of premium (TROP). This hybrid product not only gives life cover but also pays back the premiums if the policyholder outlives the policy term. This gives peace of mind and a feeling of real benefit, hence fulfilling the emotional need for visible returns.
3. Decision Paralysis: Too Many Options, Too Little Clarity
The Indian insurance industry is flooded with options, different types of policies, riders, claims procedures, and online platforms. For most, this leads to decision paralysis. Instead of wading through the various channels, they opt for the most convenient option: delay the buy.
More importantly, fear of choosing incorrectly (wrong insurer, wrong tenure, or wrong sum assured) keeps individuals from settling down for any policy.
How to overcome it: Simplify the process. Begin with a needs analysis. Utilize online calculators to find the optimal sum assured depending on your income, liabilities, and life ambitions. Search for IRDAI-registered companies having high claim settlement percentages. For guaranteed benefits seekers, shortlist the best return of premium term plan from reliable insurers.
Don't seek the "perfect" policy, seek a fitting and timely one.
4. Fear of Confronting Mortality: Emotional Avoidance
In Indian society, death is discussed in hushed tones. Mentioning life insurance or making a will is "bringing in negativity." This emotional unease translates into a complete shunning.
Young adults also identify purchasing term insurance with a confession of weakness. It's psychologically uncomfortable to think about life after you're gone, especially when you're just starting your career or family.
How to overcome it: Reframe the story. Term insurance is not something that one must accept in order to face death; it's a celebration of life and responsibility. It's taking charge that speaks of maturity, prudence, and care for one's loved ones. The more you make it a part of normal conversation, the less daunting it seems.
5. Misconceptions regarding Cost: "It's Too Expensive"
One of the most prevalent myths is that term insurance is expensive or not worth the money. In actuality, term policies, particularly the ones bought early in life, are very cheap.
A 30-year-old non-smoker male, for instance, can obtain a ₹1 crore cover for just ₹700–₹1,000 a month. Without awareness, he would imagine such cover to cost thousands of rupees every month, and so delays unnecessarily.
How to overcome it: Learn about them or consult with a registered financial planner. Shop around for quotes. Realizing how affordable term plans are, particularly at a young age, tends to be an eye-opener.
Also, those who want the combination of protection and so-called "return" can consider the top term plan with a return of premium, which returns the premium paid by the policyholder if he outlives the term.
6. Limited Personal Relevance: "It's Not for People Like Me"
Most people, particularly women, single professionals, and child-free couples, believe that term insurance is meant for people with dependents only. Although it is true that its main purpose is to provide for loved ones, it can also be a valuable resource for preserving wealth and estate planning.
Men have been conventionally employed in India for financial planning jobs, and most women continue to feel detached from insurance talks even when they are equally or better paid.
How to overcome it: Realize that term insurance is not only for married couples or parents. If you have old parents, business partners, loans, or anyone who is financially dependent on you, half or fully, it is wise to secure their future.
Additionally, purchasing a term policy early fixes lower premiums, which can pay you even if you do not yet have dependents.
7. Procrastination Loop: "I'll Do It Later"
The worst psychological pitfall is plain procrastination. With the perceived pressure being low, it continues to slide down your list of things to do. Weeks become months, and months become years. Before you know it, your premiums have increased, or worse, your health condition renders you ineligible.
How to overcome it: Set a deadline, just as you would for your investments or your tax planning. Include it in your financial to-do list every year. Make it non-negotiable. Even better, share it publicly with your spouse or parents, so that there is accountability.
Acting today will save you lakhs of rupees in future premiums and ensure your family's secure future.
Last Word: Making Emotionally Intelligent Financial Decisions
Purchasing term insurance isn't an economic decision, hitting an emotional smart spot. It's a demonstration of your capacity to see past fleeting indulgences and ensure long-term security. In a society like India, where families are tight-knit and economically linked, the lack of such insurance can lead to irreversible duress.
Whether you choose a plain term policy or the top term plan with a return of premium, the important thing is to do, not react. The ideal time to purchase term insurance was yesterday. The second best time is today.
