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5 Reasons why you should buy a term plan NOW
5 Reasons why you should buy a term plan NOW
Oct 30, 2014 | 6213 VIEWS

Insurance has always been viewed as a PUSH product. The reasons for this are multiple but there has been a dramatic change in the way term insurance plans are now being sold or rather “purchased”. Online term plans have now become part of “small talk” and thankfully it is in a positive way.

For the not so financially savvy – Term insurance is the most basic and useful form of life insurance. It provides a large cover at low premiums ensuring that the nominee of the policyholder can live the same lifestyle in case of the policyholder’s death. There is no other financial product as important as a term insurance plan.

So let me list 5 reasons why you should buy your term plan NOW.

1. The delay is just not worth the risk

You may have thought of buying a term insurance, but have been putting off the decision for no reason. It’s there on your to-do list for a very long time but has still not been done. I assume that’s the case with most well meaning individuals. Well, this is just not acceptable – you are un-wittingly taking a huge risk. The money in your bank account will not suffice for your dependents and you know that better than me. We don’t live on very safe roads and nor do we lead the healthiest of lifestyles – is the risk worth it? NO. So buy your term insurance NOW.

2. Term plans are dirt cheap
I don’t know how many of you’ll recollect term plans premiums just 5 years back. For a 35 year old, it used to be close to Rs. 55,000 annually for a cover of a crore. Now you can get the same cover for Rs. 10,069 annually. Isn’t that remarkably affordable?! That’s less than Rs. 900 per month. The cost of watching “Happy New Year” with your family would be higher! The table below shows the annual premiums for a healthy non-smoking individual. So buy your term insurance NOW.

1 crore cover for a 35 year old for 25 years
 

  Male Female
Reliance - Online Term 10,069 8,072
AEGON Religare - iTerm 10,674 9,438
Max Life - Online Term 10,674 8,764
Aviva - i-Life 10,924 10,378
HDFC - Click2Protect Plus 12,055 10,473


3. It brings peace of mind – trust me on it
The feeling of having covered your life with a term insurance can be quite gratifying. You will feel a lot relieved for sure. Your home loans, other liabilities are all under severe threat once the main source of income is gone.  A term insurance will take care of all of it. So buy your term insurance NOW.

4. Premiums increase with age
The premiums of term insurance plans increase with age. The more you delay, the more expensive it gets. Go in for a term plan basis your current income and then as your income increases, look at taking more term plans. Review your term insurance requirements maybe once in 5 years.

5. Your spouse will love you for it
Well, I don’t know how many of you are looking forward to this! But your spouse will love the fact that you took this step – mine did! It shows that you are protecting them and have put though into securing their (children included) lives. While there are tax benefits on the premiums paid, this benefit could be worth much more. So buy your term insurance NOW.

And to help you, here are 2 common questions which should be of help in case you go about buying term insurance.

How much term insurance should one take?
While this could vary from person to person, depending on the amount of assets one has, a good thumb rule would be between 15 to 20 times your annual income. Another way to look at it is, in case of your timely death, what is the amount which would be required for your family to lead a similar lifestyle?

What should be the tenure of your term plan?
Typically one would argue that the longer the tenure the better it is. I would recommend a tenure till (retirement age + 5 years). With retirement your income drops dramatically and hence the financial dependency on your income also stops. So there isn’t too much of an insurance requirement as such. Also longer tenures have higher premiums.

Advantages of Online term plans
The benefit of all term plans are the same – whether purchase online or offline. But the same benefits are available at much cheaper rates if purchased online. I would recommend that your buy online plans because the following reasons:
  • Lower premium rates
  • Faster process – Instant policy issuance in some cases
  • Less paperwork involved (often paperless process)
  • Completely transparent (fill up the form yourself)
  • No health / medical check up for certain age groups
And one of the mistakes which most individuals make – Rely completely on the employer provided life insurance cover. Let me tell you how this can go horribly wrong. Suppose you are diagnosed with a critical illness and you need to undergo extensive treatment for the same, which may go into months. You are almost sure to lose your employment and along with it, the benefits of the employer provided cover. This does happen – so don’t rely totally on it, especially when the premiums are so affordable.

So buy your term insurance NOW people!

And in case you do end up buying a term insurance plan after reading this, do me a favour – tweet me @dyohannan and let me know. I too will feel great.
 

Deepak Yohannan
Deepak Yohannan is the CEO of MyInsuranceClub. He enjoys writing on Personal Finance and contributes regularly on sites like Reuters & Moneycontrol. He is a strong proponent of online insurance and is often found pointlessly babbling about it!

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