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The Covid-19 pandemic has been a disruptor in more than one way. It has had a far-reaching effect on businesses and people’s lives. It has caused individuals to become hyper-aware of the financial risks associated with severe illness and mortality. In a way, it has been a wake-up call while highlighting the importance of building physical immunity as well as having a strong financial immunity.
At least 80% of Indians feel strongly prepared towards physical immunity which has come from taking a double dose of vaccination and adopting a healthy lifestyle. About 74% of Indians are completely vaccinated which gives them the boost to be physically immune. Similarly, about 57% of Indians feel financial immunity is equal to being financially secure and stable. In addition, 78% Indians feel that insurance is extremely important in the overall financial planning process.
SBI Life commissioned the ‘Financial Immunity Survey 2.0’ with NielsenIQ (India), reaching out to 5,000 respondents across 28 key cities covering the length and breadth of India..
Focus areas of the survey:
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Impact of vaccination on consumer attitude
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Change in behaviour/actions after a year of coping with the pandemic
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The evolving role of life insurance in one’s financial planning process
In the context of uncertainties around jobs, pay cuts, in addition to health concerns, the need for building financial immunity has gained further currency. In fact, 79% of Indians have faced income reduction, of which only for 44% of citizens' income have come back to normal. However, 35% of Indians are still facing income cut, as per the findings of the survey.
This has led to an impact for 64% of Indians on their key milestones related to accumulating wealth/savings, travelling, providing for children's education, to list a few
Further, the top three worries of Indians include:
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Rising medical/ treatment cost (59%)
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Instability of jobs (59%)
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Concerns around health of self/ family members (58%)
These findings point to the fact that Indians are equally worried about their financial immunity as compared to physical immunity. As a result, 60% Indians have started to spend less on non-essential items followed by using their emergency funds and taking financial help from family and friends. The good part is, 50% of Indians’ incomes are more focused on building financial immunity through savings/ investments and insurance.
Life insurance- Key to a strong financial immunity
These above-mentioned numbers provide more food for thought to think about life insurance. Considering that life insurance provides a safety net for your family and loved ones, helping them cope financially during an otherwise difficult time. Ultimately, it offers reassurance that your family would be protected financially should there be any uncertainty. In addition, considering several expenses – like medical, higher education, critical illness, among others – as well as rising cost of living, it is imperative to have a life insurance that can look after the family and allow them to continue with their lifestyle. Life insurance offers the income replacement that can pay for education, health care, and much more.
In this regard, self-assessing one’s financial immunity on a regular basis helps keep any uncertain situation at bay and prepares oneself/ family to face any financial crisis. Without a doubt, at least 46% and 44% have invested in health and life insurance for the first time after the March 2020 pandemic outbreak respectively. Besides, three out of four Indians have increased their saving/ investing since January 2021, while 50% of them plan to invest in savings/investments/insurance, as per the survey. At the same time, 70% of Indians strongly feel that life cover should keep on increasing when prominent life milestones are achieved.
On-ground reality in numbers
Having said that, even if consumer’s think they are financially prepared, the reality on-ground is totally different. If numbers are anything to go by, then Indians remain underinsured as the life cover to personal annual income ratio is only 3.8 times, which is way below the recommended 10x to 25x of annual income.
However, in the face of an emergency when an individual files a claim, the gravity of the situation comes to the fore. In current times, being underinsured is almost equivalent to being uninsured.
In the long-run, underinsurance can have wide-ranging impacts, including creating financial hardship and challenges in the event your pay-out remains insufficient to meet your family’s financial needs. Financial hardship can severely affect family members, too. Whether it’s your partner, your children, or your extended family members, the people you’re responsible for can end up being adversely impacted if you struggle financially.
Summing it up
Life insurance is a great tool for both protection as well as helping an individual adopt a saving habit in a disciplined manner, which ultimately leads to creation of a financial safety net for the family in the long run.
Moreover, considering that every individual’s financial situation is different. Knowing why life insurance is important for your own financial plan could be helpful in choosing a policy that best fits your needs.
Considering that the current global health crisis is not a one-off situation, it all the more reiterates the need to buy an adequate life insurance and secure the financial future of the family members.