A term insurance plan is akin to the home page of one's financial plan....
Term insurance plans have become extremely popular in India. Till a few years back, it was a product which no company used to aggressively suggest to their customers. But all that changed with the launch of aggressively priced term insurance plans by some insurance companies. Customers realised the importance, lapped it up and now most insurance companies use term insurance plans as an on-boarding tool for new customers. Term insurance comparison sites further added to the convenience and ease of selecting the most suitable option.
While there are a lot of reasons why you should definitely buy them, let me list the most important ones.
1. It is the Best form of protection for your loved ones
I genuinely believe that there is no other financial product which offers a better form of financial and mental protection to you and your family. The only better option is having cash-in-bank, lots of it. And that unfortunately takes a lot of time, for most of us. Even then, most of it would be used up for some important events in life, which keep coming – home loan, child education, car, child’s marriage, medicines, home renovation and the list is endless. And all this will happen only if you keep increasing your income, every year, till your retirement age.
So how does one plan for any unfortunate event to the bread-earner of the house? By taking a term insurance plan – a 30 year old could get a 1 crore cover for just Rs. 7,788 per year for a term of 30 years. That is a price I think one should be willing to pay to give a solid protection to your family.
2. It is the really cheap if you buy it when young
Buying it when you are young makes a huge difference. Sample this for a 1 crore cover for 30 years.
Age 30 – Annual Premium is Rs. 7,788
Age 35 – Annual Premium is Rs. 9,912
Age 40 – Annual Premium is Rs. 13,216
Age 45 – Annual Premium is Rs. 17,700
The difference in premiums is substantial. You will save a lot of money by taking the plan early in life.
3. Pricing may be low, but insurance companies are choosy
With the premiums being low, the insurance companies have become increasingly careful in offering the plan to customers whom they perceive as risky. With age, the chances of developing lifestyle diseases are very high. And all of us are increasingly prone to them because of the nature of our jobs and pace of our life. Once you develop any illness, insurance companies will be very reluctant to on-board you or you will find the policy to be very expensive as the premiums will be increased based on the risk assessment.
So take the plan when you are young and healthy.
4. Extremely comprehensive cover with riders
While death cover is important, you need to cover scenarios where income stops without loss of life. It is the worst possible scenario – it adds to the expenses exponentially and comes with complete loss of income in most cases. Critical Illness and Accidental Disability Riders cater specifically to such scenarios. I would recommend going for these riders to bolster your basic cover amount.
5. Smart Flexible Options
Let me list some real smart options which can be taken advantage of:
- Cover till the age of 99 – This is almost life leaving a gift for your loved ones. The payout is almost guaranteed.
- Limited pay – Pay only for 5 or 10 years and continue to enjoy the cover amount for the rest of the policy term. You have a good job now, just pay the premiums and finish it off when you can afford to. Job security is really low nowadays.
- Pay till 60 – This is another good one. It is a variant of limited pay option. Who wants to pay premiums when you are retired and income has stopped. So finish off the premiums before you retire.