Why one should take Term Life Insurance Policy

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Why one should take Term Life Insurance Policy

Category : Insurance Planning

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Term Insurance: Term Insurance is a Life Insurance product offered by insurance companies which provide for coverage for life of insured person for a specific period or term. The death benefit is paid to the nominee of the policy holder in the event of death of the insured person.Unlike, traditional life insurance policies Term Insurance does not give your money back if the insured person is alive during the policy period.Many people would consider this as one of the set back of term insurance policies.But, I would like to disagree with this thinking completely.Here, I would analyse why term insurance is way ahead of traditional life insurance.

Objective: An insurance policy should completely be meant for protection from any unprecedented events.We take insurance coverage for any unforeseen future contingencies like death of the sole bread earner,accidents, medical needs and many more.Therefore, we are pretty much sure about the objectives of taking insurance coverage.

Mistakes: Unfortunately, most of the people consider the insurance product as an investment.Whenever an insurance agent approaches to a person, he just simply asks the agent….. Kitna dene se kitna milega 20 saal baad“.

This means he is just simply bothered about how much money he is going to get back after a certain period of time.But, he never asks is this insurance coverage “Sufficient“.”Will this cater my family for another 30 years in my absence“. We don’t give priority to the coverage value,rather we ask for returns.That’s why most of the people in India are under insured.We must consider the adequacy of the insurance amount and not how much we would get back after the policy ends.

Motto: “We must not forget that an insurance is meant to cover the inherent risks only and we need to take protection against that”.Also, we have to take adequate insurance coverage considering our income profile and needs so that when the actual incident occurs, our family members do not feel that they are out of whack.

Awareness: Around 30% of the total Indian population are covered through insurance policies.This is very very less figure indeed.How many of us have heard about an awareness campaign or programme? The answer will be very few.Considering the present economic scenario many more people should be brought under this net.Also many more effective campaign need to take place to make people aware of the benefits of taking insurance policies.In my personal opinion pamphlets and leaflets may be distribute with the morning newspapers letting them know the necessity to take insurance coverage.

Principles: A person should take life insurance coverage for at least 10 to 12 times of one’s annual income.This means if a person earning ₹ 5 lakh annually, he must take life insurance coverage for at least 50 to 60 lakh.

Why Term Insurance: If a person(is 33 years old and policy term is 27 years)  wants to take life insurance coverage for 50 lakh, he has to pay around .2.08 lakh as annual premium under Traditional Life Insurance policies. On the other hand if he chooses a term insurance policy he would have to pay just an amount of 12,413/- annually for the same life coverage of ₹50 lakh .Now, see the difference.And one important question is how many of us can afford to pay annual premium of 2.08 lakh. The main reason why Term Life Insurance is much ahead of traditional life insurance policies is that it only prioritizes risk coverage and does not guarantee for anything else.

I would just conclude with one sentence………………

” Insurance is to cover the inherent risks only and not for anything else”

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