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Why term insurance plan is important | FAQ #27

Last Updated: Apr 10, 2018 | 1,671 Views
In my opinion term insurance is by far the most important financial decision after opening a bank account. 

If you have anyone dependent on your income, you need to take term insurance. Taking a cover when you are young makes you eligible for a 1 crore cover at less than Rs. 10,000 per annum. Isn’t that a sound financial decision???

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The other way to provide financial security is to save, save and save. But to save you need to earn for a long period of time. Back of the envelope calculations suggest that you will need to save Rs. 60,000 every year for more than 50 years to build a corpus of Rs. 1 crore (assuming a 8% annual return) for your family. Isn’t that too large a risk to be running?

It is much more prudent to spend Rs. 10,000 every year odd and secure a 1 crore cover. Life expectancy is on an increase but risks are also high. We keep hearing these freak incidents of young people passing away in the middle of their great careers. An accident could happen to anyone anytime. Is it worth taking the risk? 

Our propensity to save is also reducing. That trip to Singapore and that sleek looking phone is irresistible. We don’t think too much before spending. Saving is not very high on priority. We tend to always want to start saving from the next year. 

That is why term insurance is very important. It provides a very large cover at really affordable premiums. You can breathe easy and be completely secure from a financial perspective.

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