Why People Avoid Life Insurance

Why should we buy...

Why People Avoid Life Insurance

Even today, educated professionals who plan everything else in life completely avoid term insurance. The answer reveals fascinating patterns in how we make financial decisions.

The "Money Back" Psychology

When people ask "Will I get my money back?" they're displaying loss aversion - the psychological tendency to fear losing money more than gaining equivalent benefits. This mental bias makes expensive money-back policies feel safer than logical term plans.

Our brains are wired to avoid losses, even when the alternative provides better protection.

The Present Bias Problem

Humans naturally focus on immediate rewards rather than future protection. Term insurance requires paying for something you hope never to use - a psychological challenge our minds struggle with.

We can easily spend ₹50,000 on a vacation that lasts one week, but hesitate to spend ₹12,000 annually on family protection that lasts decades.

Social Proof and Insurance Decisions

Most people don't discuss life insurance openly. Without visible examples of others buying term plans, individuals default to familiar options like LIC, even when financially illogical.

When everyone around you chooses money-back policies, questioning that choice feels risky.

Understanding the Choice Patterns

Here's what actually drives insurance decisions:

Emotional Factors:

- Fear of "losing" premium money

- Comfort with familiar brand names

- Need for tangible returns

**Logical Factors:**

- Family financial protection needs

- Cost-benefit analysis

- Coverage amount requirements

The Decision Architecture

The real choice isn't between insurance products - it's between psychological comfort and mathematical logic.

LIC Money-Back Plans:

- Emotional comfort: You get something back

- Financial reality: ₹1000 monthly for ₹5 lakh coverage

Term Plans:

- Emotional discomfort: No money back

- Financial reality: ₹1000 monthly for ₹50 lakh coverage

Why This Matters

This decision pattern reveals how we approach many financial choices - prioritizing emotional security over mathematical efficiency.

Understanding these psychological forces helps explain why smart people often make financially suboptimal decisions, not just with insurance but across all money matters.

The Bottom Line

If others depend on your income, the question becomes: Do you want to feel good about your insurance choice, or do you want your family to be actually protected?

Both are valid human needs. The key is recognizing which psychological factors are driving your decision.

What patterns do you notice in your own financial decision-making?

Thank you for being here.

— Prafull Ranjan | Stories that Speak to the Heart ❤️