One of the best life insurance policies of modern times: Term Insurance
With the changing lifestyle, rising inflating cost even a burger will cost for not less than 50 bucks. But how about you are getting insured for worth crore rupees for merely 40 bucks? Stunned! Well in the times of high inflating rates, rising lifestyle pattern, global economic crisis where Rs 40 will give just a pinch in your pockets it can actually purchase a bunch of profits for you in near future. Yes, this amount is enough to buy a term insurance cover of Rs 1 crore. 35 year old Mumbai based professional Mr. ShrikantSatle pays an annual premium of Rs 14067 for an online term insurance policy he bought few months ago.
Term policies have slowly but steadily emerging as one of the winner’s in the race of insurance sector. Fixed premium rates, financial benefits to the beneficiary, companies advertising term plans in a big way and the very convenient online channel are some of the driving factors for the sale of term plans in India.
Financial expert believe that term plan is the best form of insurance because it gives a very high cover at a low price. The premium of a term plan is a fraction of what you have to shell out when you buy an endowment plan, a money-back policy or a ULIP with the same coverage. Of course, this is mainly because there is no investment component in a term plan. The entire premium goes in covering the risk.
While buying term plan here are few things that you should consider:
How much cover is required?
Life insurance is designed in providing the beneficiaries with sufficient corpse so that they continue with the same standard of living while in the presence of insured person. Ensure that your life insurance must take care of the following things: the basic expenditure that your family will incur, major expenses like marriage of children and other liabilities like loans. If the life cover is inadequate, it will defeat the whole purpose of buying insurance. It should be sufficient to fulfill the future needs with inflating costs.
Till when you require?
It is very important to decide the length at which you need the term cover. It is advisable that an insurance policy should cover a person till the age he or she intends to work. Ideally it should be till the age of 60 but considering late marriages and conceiving children at a higher age means responsibilities do not end at 60 so it can go upto 65 years.
Don't take a short-term cover of 15-20 years that ends when you are in your 50s. You will be fascinated about low premium rates but understand that you will be insuring yourself for the non risky years. So when you enter your 50s and feel to take fresh insurance at that age, it will cost you a bomb. You might even be denied the cover considering your health issues or any physical accidents occurred in life. It’s like planning to go from Mumbai to New York via Dubai paying extra cost for your journey.
Choose a term plan that offers you the flexibility of fixing the tenure. Many online term insurance plans come with fixed tenures of 15, 20, 25 and 30 years. So if a 32 year old buys term plan for 30 years he will be covered till the age of 61 years. Often people thing insurance is boring mode of financial security. But there are many people who take it as creative challenge and allocate their funds accordingly to achieve each milestone as years pass by. For instance, Mumbai-based Vineet Kumar has configured the tenures of his four term plans in a way that they match his financial goals. Whenever a goal is achieved, corresponding term plan terminates. So, if he is not around suddenly, the relevant plan will ensure his children education and career expenses are not met in time.
Well “Inflation is our birth right and we will get it” seems the new motto of our government. The rising inflation cost at alarming rate warns us that the value of term insurance coverage we buy today will come down almost half its value till the tenure completion period. To get around this problem, some insurance companies offer plans where the cover increases by 5-10% every year or is indexed to inflation. Thus, when your sum assured increase it will automatically handle the expenses and inflation costs.