Of all Insurance Plans … Buy Term Insurance First!!
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by: dialabank
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Word Count: 1674
Date: Mon, 12 Dec 2011 Time: 11:26 PM
It requires a great deal of courage and maturity to accept an inevitability of life -DEATH.
When we accept that we can die anytime and there is no guarantee to life, the first question we will have to deal with as a parent / spouse is that, what will happen to my family? Will they have money to sustain a comfortable lifestyle, complete their education, and fulfill their dreams? Here comes a simple solution – INSURANCE.
A tiny amount of our income will ensure that our families are secure incase the unforeseen happens.
Here I would suggest to all to go for a Term Insurance Plan. Term plan is the basic white bread of insurance. If money is an issue then there is no requirement to add butter/ multigrain / oat etc. All the other adds on will increase the premium. Buy what you can easily afford, to secure your family’s future.
Questions that will come in mind are
1. What if I don’t die? My money is wasted..
Let’s take an example of a mandatory insurance - Car Insurance. If we don’t have an accident the amount gets wasted. However, we still take it because in case we don’t have it we get penalized by the traffic cop. So to avoid a fine, you pay a premium of approx Rs 15,000 for a cover of Rs 7 Lacs, which is much higher than what you would pay for a Rs. 1 crore Sum Assured for protecting your life!
Therefore, our money is not wasted. It’s insuring much better things for much less.
2 . Isn’t a Pension Plan better? At least I will get something at the end of it.
If you have the money to spare and invest, go for it. But if you have limitations on your funds then a Term Insurance is the very basic you should go for.
3. Isn’t it just better to put the same amount in my bank every month or invest in shares?
In the case of Investments, the day you die your contributions will stop too. Also, investments are very risky and come with no guarantee.
Term Insurance is also eligible for tax deduction under Section 80G. In fact all Life Insurance plans act as a great tax saving tool. Its advisable to do proper tax planning. Be aware of your tax liabilities as per your income slab, and then use insurance as a tool to use the same money for your family’s security.
Another thing to be kept in mind while buying a Term Insurance Plan is that always take the maximum term period that is available to you. It will make a big difference in the total amount of premium you pay in total for your term insurance. The amount you will be required to pay for your term insurance at a younger age will be much less than when you buy it later. So buy the full term at the first go. Don’t think about extending it after a few years.
Example
Client Name : A
Age : 30 Yrs
Insurance Cover (Rs Crs) : 1
Policy Term : 15 Yrs
Premium / Yr : 11333
Total Premium (Rs) : 169995
Additional Policy Term Yrs) : 15
Premium / Yr : 31711
Total Premium : 475665
Grand Total : 645660
Client Name : A
Age : 30 Yrs
Insurance Cover (Rs Crs) : 1
Policy Term : 30 Yrs
Premium / Yr : 15304
Total Premium (Rs) : 459120
Additional Policy Term Yrs) : 0
Premium / Yr : 0
Total Premium : 0
Grand Total : 459120
In the above example, not taking a long term policy in the first place and therefore taking a second one after the maturity of the first policy increase the total outflow by 41%
Therefore, of all the available Insurance Plans remember the following
- Buy Term Insurance First
- In case you have additional funds to invest, go for the other options
- When you buy a term plan, take the cover for the maximum policy period in the first go and save on the total premium outflow.
Secure your family’s future… Invest in the right Term Insurance Plan.
About the Author
Gaurav Khurana is an expert on Term Insurance . He is the Founder Director of dialabank.com (Call 60011600) and Ex National Sales Head – ING Investment Mgt India and Vice President Citibank N.A
