Term In­sur­ance

Best Buy and More

Consumer Voice - - Contents - Subas Tiwari and Gopal Ravi Ku­mar

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.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.