Monday, January 4, 2010

Top reasons on Why you must buy a Term Insurance for life cover now!


Term insurance is a type of life insurance policy that provides a pure risk coverage for a certain period of time, or a specified "term" of years, say 25 years. 
  • If the insured dies during the time period specified in the policy and the policy is active - or in force - then a death benefit will be paid.
  • After the agreed term of life cover and protection is over, no money is given back.
Most common question and my answer: why should I pay annually for a product if I am not going to get anything back? Simply put, every earning member with dependants needs life cover in modern world! And term insurance is the most inexpensive way to purchase a substantial death benefit on a coverage amount per premium value for money basis. I earnestly recommend you to be aware of this fact and buy one at the earliest.

Even without any dependants, you would want to buy it early in your earning years, inorder to have a  low premium for a high risk cover.
For eg. a healthy 35 year old would pay INR 8000 for a 50 lakh cover for a period of 25 years, then a 25 year old would be assessed to get 1 crore for the same amount.So, for this 25 year old, a smart strategy, incase he want bigger coverage, he could average the costs and buy another term policy at the age of 35 for another 25 years!
MOST insurance agents donot recommend term insurance as they get no or very less commission on this.So, they somehow add riders and moneyback options etc and sell other high yield (for them:) products like ULIPs(Unit linked policy) and additional risk covers etc.

Because term life insurance is a pure risk coverage plan i.e for pure death benefit, its primary use is to provide coverage of financial responsibilities and liabilities, for the insured. Such responsibilities may include, but are not limited to, consumer debt, life care and higher education for dependents, funeral costs, and mortgages etc. Since there is no value of your financial investment or savings element involved, the premium accounts only for the risk cover costs (mortality costs) and hence is very low compared to other insurance products. No other insurance policy will offer you as much value for money as this Term Insurance!

Simple rules apply, once you decide to by term insurance:
  1. Find out how much lifecover you need for now and for the next 25 years, based on your lifestyle necessities.There are so many tools available for this online.Check Know your life cover needs here:aegonreligare tool.
  2. Compare different term insurance products from websites and agents. Select the least premium policy for the decided life cover. Check:AegonReligare Term Insurance comparison tool.
Note: I was initially apprehensive of term insurance because of the very high amounts quoted by different insurance companies and when I saw Aegon Religare offering this at a best offer, I took one. It was easy online to compare different companys' charges, so sharing it with you. Share your opinion and experiences, for the benefit of all.

Tip: Just dont fall prey into some smart talk by a known insurance agent or financial advisor, who benefit from commissions. Also, donot take some insurance, just for tax saving purpose along without identifying your needs.

If you understand this and believe in the concept of insurance now, think no further - Term insurance is protection against risk to life and I recommend you to have it at the earliest in your financial portfolio.Rest you leave it to God!

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