Term Insurance

Best Buy and More

One of the popular products from all insurance companies is term insurance plan, which also happens to be the most misunderstood plan. In order to give buyers a better understanding of how term plans work, how beneficial they can be to the common man, and which companies have a better offering, Team CV did a thorough comparative analysis of popular products and shortlisted the best investments in terms of easy access to information, value of cover offered, ease of availing claims, maturity benefits, and more.

There are 24 life insurance companies in India, yet 70 per cent of the insurance business is cornered by Life Insurance Corporation of India (LIC), despite its average offerings. The reason for the same is simple and understandable: people in India are very cautious about investing their monies and prefer a company with a ‘safe’ image – hinting that if it ever fails, governments will bail it out. The remaining 30 per cent insurance investments are

with the other 23 companies selling comparatively competitive products, promising lucrative and assured returns, and steadily building up investor confidence. The following report will tell us how the term insurance plans of 13 companies fare on crucial parameters.

Term Insurance – Do You Need One?

Many of you who often watch TV must have seen an ad where a simple question, ‘do you need insurance?’, is answered by visual representation of the uncertainties of life.

Knowing there is always an element of concern or risk, you wish to have some financial security for your dependents and loved ones and this is where term insurance plays an important role. So the question that you may ask is not whether you need one, but which one you need and why.

Be Prepared, Mentally

Firstly, stop looking at insurance as a tax-saving instrument or a safe investment ensuring stable returns. Yes, it gives you both of those benefits, but the purpose is not just that – it is to ‘insure’ that your responsibilities are financially secured. The simplest meaning of insurance is ‘protection against risk’.

Secondly, stop questioning the returns on investments. ‘Why should I pay annually for a product that does not give anything in return?’ is a common question that people ask insurance advisors. Very few appreciate the fact that you pay a premium because there is a guarantee that if something happens to you, your family will get maybe over 100 times of the premium that you pay now.

In the unfortunate event of one’s death, the term insurance plan gives your immediate family a sufficient amount to maintain their standard of living. The payout can also fund your child's education, help pay off debts, and even have an option of providing additional capital in case your spouse wants to start a business to support the family. This is the reason term insurance is also known as a ‘pure risk’ plan – simply because it mitigates the risk of you not being there to provide financial support to your family.

Here’s an example: A person bought a term insurance plan with a life cover of Rs 30 lakh, and the tenure or the term of the policy is 20 years. So, if the insured person passes away in the duration when the policy is valid, the family (the nominee or the legal heirs as the case may be) will be paid a sum of Rs 30 lakh. The premium paid by the dead individual could be for one year or three years and might have varied between Rs 5,000 and 15,000.

Ascertain Your Safety Net

It might not sound pleasant, but it is important. Have you ever ‘quantified’ your value to your family in terms of money? To simplify, have you yet figured out how much you would have earned, saved, invested, say, 20 years from now keeping in mind the expected future

growth? The value or the number that you will attain after your rough calculations of your own monetary worth is the ‘safety net’ you provide for your family.

An important aspect of term life insurance is to ascertain the safety net that the family of the insured will require in the event of the demise of the insured. While calculating, you may keep in mind your standard of living and planned investments and expenses. Also to be considered are the various important events planned for the future – like you might have planned for a wedding in the family or your ward’s higher education. The point is to evaluate the amount that you would earn and save in a set period and see to it that the insurance cover matches the same in case of your demise.

Point to be noted: The earlier you buy the term policy, the lesser is the cost of premium you may have to pay.