My friend thought I had just told him to commit financial suicide.
“You want me to… cancel it?” he asked, clutching his premium receipt like a holy relic. I nodded. For the last 15 years, this guy has been dutifully paying for a massive life insurance policy, convinced that stopping would be a betrayal of his family.
The truth? He was literally burning money to protect people who no longer needed protecting.
About the author: Abhishek Kumar is part of a freefincal’s curated list of fee-only financial advisors and a fee-only India member. He can be contacted via his website, sahajmoney.com.
The Scaffolding Fallacy
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Most people view life insurance as a “forever” commitment, like a marriage or a tattoo. We’re sold this idea that being a “responsible adult” means carrying a heavy death benefit until the day we actually kick the bucket.
But here’s the reality: Life insurance is a temporary support.
When you’re building a house, you need the scaffolding to hold everything up while the structure is weak. But once the roof is on, the walls are cured, and the foundation is solid, you don’t keep the metal poles up “just in case.” You tear them down so you can actually enjoy the house.
If you’re still paying for a massive term plan when your “financial house” is already built, you aren’t being responsible. You’re just overpaying for a safety net that’s hovering two inches above the ground.
Here is the exact 4-step audit you can use to identify if your term plan is no longer required.
1/ The Dependency Test (The “Who Cares?” Metric)
Insurance isn’t a lottery ticket for your family; it’s an income replacement tool.
Ask a simple question: “If I am no longer alive, whose life gets financially derailed?”
A decade ago, the answer could be your wife, your parents or your kids. But if today your “dependents” are no longer dependent on your income, the “life” part of life insurance has left the building. Carrying a policy for adult children who are perfectly capable of feeding themselves isn’t a legacy; it’s a donation to the insurance company’s executive bonus fund.
2/ The Debt-Free Milestone
Most people buy insurance to cover the “Big Three Loans”: Home Loans, Vehicle Loans, and Education Loans.
If your liabilities are zero, your “need” for a massive payout to clear the slate is also zero. Why pay to protect the debt with life insurance when the debt is already paid? The leverage insurance provides loses its edge.
3/ The Self-Insurance Threshold
This is the “Value Bomb” that most agents will never tell you about. There is a point where you become “Self-Insured.”
That’s the point, if you passed away tomorrow, your family wouldn’t need a check from an insurance company to pay for the bills. The assets themselves generate enough returns to sustain their lifestyle indefinitely.
When your investments can outrun your disasters, you’ve officially won the game.
The “Social Proof” of Letting Go
I know it feels taboo. We’ve been conditioned by decades of “Peace of Mind” marketing to feel guilty for even thinking about cancelling a life insurance policy, especially a term plan. But the most financially literate people I know, the ones who actually retire early and stay retired, are ruthless about cutting ties with products that have outlived their utility.
We aren’t in our 20s anymore. We aren’t “just starting out.” If you’ve done the hard work of saving, investing, and killing off your debt, you’ve earned the right to stop paying for protection you don’t need.
The Raw Truth
Insurance companies love “sticky” customers. They love the person who buys a 30-year term and just lets it auto-pay until they’re 65, even if their kids are crorepati by then. That’s pure profit for them.
Don’t be the person who subsidises their profit margins because you’re too afraid to look at your own balance sheet. Be honest about where you are in the “Building” vs. “Enjoying” phase of your life.
If the house is built, remove the scaffolding. Use that extra cash to actually live in the house or, better yet, to fund the memories you want to make while you’re still healthy enough to enjoy them.
At what age do you plan to be completely “self-insured,” and what’s the one debt holding you back from getting there?
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