I had been procrastinating the purchase of an anti-puncture liquid for my traditional tyres on the adventure tourer bike. Then the long weekend came, and we started packing for the journey, I still did not have the small Rs. 1000 can.
We packed and went anyway, after all, what worse can happen. My bike faced a punctured tyre at 2:00AM at night, that too about 3 kilo meters away from any possible help. Life is like that, I thought and regret there could not help.
Life is indeed like this, as the adage points out, “if anything can go wrong, it will.” The trick is to be prepared for it, rather than consider it morbid, wishful thinking, or abad sign and shoving it under the carpet,especially when it comes to term insurance plan.
Why Term Insurance Plan?
Term insurance plan is one instrument which is inexpensive,easy to buy and empowers you to cover your loved ones for the ultimate risk of life. Nothing can fill the emotional void created by the death of a loved one. However, it is the financial void created by the death of primary breadwinner of the family that aggravates the pain for the family.
For a moment let’s focus on the financial implications of such an event:
Assuming both you and your spouse are earning Rs. 10 lakhs and Rs. 5 lakhs per annum respectively, and your monthly household expense is Rs. 70,000 per month (Rs. 8.4 lakhs per annum), which includes the expenses of your two kids. Rest of the money obviously goes into savings for the future of your kids.
If you are removed from the family along with your income, the annual income immediately goes below the annual expenses. You may consider the decline in the total expenses as less money will be spent by a three-member family, even then the savings decline significantly:
Savings with Four Members (Income minus Expenses):
Rs. 15,00,000 – Rs. 840,000 = Rs. 660,000
Saving with three members (assuming your individual expenses up to Rs. 25,000 per month)
Rs. 500,000 – Rs. 540,000 = -Rs. 40,000
Thisclearly shows, that they will need to scale down their lifestyle, and your kids’ future goals, and dreams will be badly hit.
However, this is only going to hold true if you did not buy a term insurance before hitting the ultimate block of life.
How does Term Insurance Plan Help Your Family?
Term insurance covers the risk of untimely death of insured with a large enough corpus (up to 20 times of their annual income) to provide the rest of the family a sufficient financial relief. The term cover will offer the sum assured amount to your nominee, which he/she can deposit in a safe investment and receive a monthly income from it, to continue their lives and meet future financial goals.
For example, if you buy a Rs. 1 crore term cover, you nominee will receive this money and can take care of their life and future of kids’ as well.
You can choose a higher sum assured as per your needs and eligibility. Furthermore, insurers like ICICI Prudential Life offer multiple modes of payments, for example:
- Lumpsum, where the nominee can take the whole amount in one instance and invest the same in an income-generating or growth investment.
- Monthly or Quarterly income stream of a fixed sum which will continue for a chosen period; i.e. your nominee need not worry about investing a large sum.
- Inflation adjusted income stream, where each year regular payments are adjusted for the inflation; i.e. no worries about the inflation as well.
How Much Does Term Cover Cost?
In short, ‘not much.' It is one of the least expensive personal insurance covers available on individual life. For example, a cover of Rs. 1 crore will cost about Rs. 15,000 to Rs. 20,000 per annum, for a 30-year-old individual.
So, in a way, it is affordable for any income group. However, there is a limit on the maximum cover you can be eligible for. This limit is decided based on your annual income and is usually 20 times of it. So, let’s say you are earning Rs. 10 lakhs per annum (as the case above) maximum sum assured available to you under term life cover will be Rs. 2 crores.
How to Buy Term Life Insurance?
The best way to buy term life insurance is online. You might be worried about the safety and authenticity of the transaction. However, in fact, online mode is not just cheaper than thetraditional method, you also get to choose your benefits more carefully and after diligent comparison. For example, ICICI Pru Life’s online term insurance cost about 20% less than the normal traditionally bought term plan.
There are much more reasons to choose the online mode:
- No paperwork: Most insurers allow totally paperless transaction
- Complete at your convenience: Once you start, you can even submit application at 1 O’clock at night
- 24x7 Support for completing the application form
- Faster Processing: A normal application may be processed within 15 days and policy issued.
So, what are you waiting for, buying term insurance is easy, necessary for the financial protection of your family, and inexpensive?Stop judging your thoughts and stay prepared for contingencies.