Why Term Insurance Is A Must Have!

By Saroni Chakravarti | November 9, 2019

The future is uncertain and you may not always be around to take care of your family. However, by opting for a Term Insurance, you can ensure that your family is well taken care of in your absence.  

Science may have advanced to a point where we can alter our genetic make-up to lower our predisposition to certain aliments, but we still cannot tell with much certainty what the future holds for us. Planning for your family’s well-being and financial security is easier when you’re around but what happens to them in your absence?

One way to ensure that your family’s finances are not in a tumble when you’re gone is to opt for Term Insurance. A Term Insurance plan is a highly cost-effective way to safeguard your family’s financial future as it offers low-cost premiums and yet, your family will receive the entire amount when you’re gone.

What Is A Term Insurance plan?

One thing to bear in mind about Term Insurance plans is that if you survive the policy tenure, the insurer won’t give you any maturity or survival benefits. However, recently, many insurers have revised their guidelines in this respect too. Some insurers have introduced a benefit whereby the company will pay back a certain portion of the premium paid.

Some of the things to bear in mind before opting for a Term Insurance are:

  1. The Term Insurance should be able to provide adequate coverage and income to your family in your absence.
  2. The tenure of the Term Plan should cover the span that you plan to work. It should cover at least 65 years.

Term Plans are plain vanilla products-they give very high life covers for very low premiums. Since they don’t give anything back at the end of the term if you outlive it, most insurance agents don’t sell these plans as much as other plans that give something back at the end of their tenure.

Most of the other insurance plans are built around the Term Plans or have the Term Plans as a part of them. As the features get added, the premium also increases. But many times, the premium increase is very steep as the commission (to the agent) and company charges increase as a percentage of the premium. This increases the premium rapidly in value terms.

Reasons Why You Should Buy Term Insurance:

Low Premium:

The insured sum for Term Insurance plans doesn’t have an investment element. This is why the premium amount for Term Plans is much lower than other insurance plans. An individual would have to pay only one percent of his annual income to get a life cover.

Offers Financial Security:

An untimely death can bring your family’s life to a standstill. Not to mention how it will leave their finances in jeopardy with the added responsibility of bearing all financial responsibilities alone. Investing in a Term Plan will help them meet these needs even in your absence.

Low Claim Rejection:

As should be the case before buying any financial product, when you’re buying a Term Insurance plan, remember to disclose correct facts about your health conditions, finances, habits etc. IRDA has recently mandated that no insurance company can claim that there’s been a non-disclosure of facts after two years of the policy becoming effective.

No Brokerage:

Typically, brokerage fees is included in the premium allocation charges and is a recurring expenditure. Every time you pay the premium, you’re also paying a certain amount towards brokerage fees. Usually, the quantum of brokerage fees decreases over time and accounts for 5-6% of the total premium amount. However, you can still avoid paying this brokerage fee if you buy the Term Plan online.

Riders:

Most Term Plans come with riders that are nothing but additional benefits that come with a nominal fee. You should opt for these riders only if you need them. Some examples of riders include critical illness, death due to accidents, partial or permanent disability etc. If you’d like to buy a rider with your Term Insurance plan, check if you really need it and go through the offer documents carefully to know what the exclusions are.

A Term Insurance plan has a range of benefits-it takes care of burial and funeral expenses, covers education and other expenses of the family, pays off loan/debts that were taken during the lifetime of the policyholder.

BankBazaar Ties Up With Coverfox:

If you’re looking to buy a Term Insurance plan minus brokerage fee, you can opt for a Term Insurance plan via Coverfox. Coverfox lists Term Insurance plans from 12+ popular insurers all in one place and you can get a cover of up to Rs. 5 crore with claim support and nominee assistance.

There is no monetary value for peace of mind. For everything else, do take a Term Insurance cover.

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11 thoughts on “Why Term Insurance Is A Must Have!

  1. Avatarsashi

    True, term plans are the best plans if one has some laibility like outstanding housing loan or personal loan. Do not compare vehicle insurance with life insurance. if vehicle insurance is not mandatory many people will not take it in our country. Term plans are popular in the west where the int rates were artificially kept abysmally low to increase consumption. will someone save if the int rate is 0 or .50%. Today the common house hold is suffering in the west. their economy is driven by excessive spending and our economy is driven by savings. In India the returns from insurance plans have been around 6 to 8% , so people go for plans which give both cover and decent returns. Indian DNA will not accept nil return on maturity. Majority of the people do not have the discipline and patience to save in other instruments for long term. these insurance plans make them save compulsorily. ( not ULIPS). After all we do not eat kellogs and sandwich for break fast ,we stlii eat idlis, dosa and chappathis. why copy the western models? A mixture of term plans, traditional plans and equities proportionate to the risk tolerance would be the right suggestion for Indians.

    Reply
  2. Avatarrkumar

    There are two kinds of term plan, one that we but with the help of an agent and another that is purchased online. The annual subscription for the same term plan purchased online is much less than that of the plan purchased from an agent. Why i? Can anyone throw some light upon it.

    Reply
  3. Avatarfarouk

    can u provide a comparision of term plan with any non profit insurance plan. Then it will make more meaning perhaps. lets say for eg. Tram plan for 10,00,000 is Rs. 4,500.00 for a 35 year payable for 25 years. A non profit plan that will cover a risk of 10,00,000.00 for a 35 year old payable for 25 years will br 4,500+x. So the insurer will pay x*25 and in return he will get 10,00,000 at the end of 25 years. Whereas if he invested that x in a bank or government bonds what his returns would be? Can u please answer

    Reply
  4. AvatarAnurag Gupta

    No doubt term plans are very good for life coverage, but as said above in above article that it don't matter, that from which company you are taking term plan ???

    Because there are so many companies in the market, who offer to return your premium after the completion of your policy term like ….birla sun life, tata aig, bharti axa…

    So please do research on this while talking a term plan…

    Reply
    1. AvatarKiran

      If Insurance company returns money then its not term Plan.
      From where Insurance comapny can pay you back, it would be our money… so u pay more to get ur money back.

      Reply
  5. AvatarBiraj

    Its really a noble though you share. We, Indians (proud to be of ), really don't know these kinds of information.
    But now its time to wake up and change the system, the life style and the future of India.

    Thanks,
    Biraj

    Reply
  6. AvatarSatish

    Yes term plans are good and to ensure sound economic progress they must be made compulsory as is car insurance. Not only will this increase the safety of families but also provide a social cover to the society at large. The coverage amount can be decided based on the economic strata which each individual belongs to…

    Reply
  7. AvatarJames

    Very good article.

    Apropos below, some other articles here by same author have some discrepancies, but this one is on target.
    Some comments are not warranted, seemingly by inexperienced agents who imagine they know all, for example the money back term policy premium costs double.
    The article is about protection and not about savings which need more money, which a person may have or may want to invest elsewhere.

    Reply
  8. AvatarCVJ

    Nice post.
    Term Insurance is great and must.
    Aviva India recently launched an online term plan "i-life" and I was much impressed with it.

    Reply
  9. AvatarPeeKay

    Today, with the present Life Style there are many Middle age people with Diabetes, BP and also
    could be with a AngioPlasty or Bye pass Heart Surgery. ( and also for people In 50 – 60 Yrs)
    Though most of them are fit & healthy with present Health aids.

    What are the Best policies for such people ? Which company issues them ?
    the Information will help many.

    Reply

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