Why Term plan of Life Insurance is essential? wiseman, December 25, 2022November 22, 2023 Share Now!In today’s materialistic world Term plan of LIFE insurance is essential and of utmost importance. ‘LIFE’ where ‘L’ can be considered as ‘living too long’ and ‘E’ as ‘early death’ has a big ‘IF’ attached to it. Both these L and E can be categorised as risk, and life insurance is a good tool to manage this risk. Managing the risk of ‘living too long’ through insurance can be debatable but the risk of ‘early death’ can be managed only through life insurance policy. This leads us to discussion of a very basic and essential type of insurance policy i.e., term plan or protection plan. 2. Each and every income generating asset must have term plan without any second thought. In simple words this type of policy is a contract between a person seeking life cover and the insurance company which provides the life cover amount in the event of death by any means. In protection plan life cover is quite substantial and premium is quite less vis-a-vis other insurance plans. Premium in this type of plan is a function of- a) amount of cover, b) age at entry, c) gender and d) the term or period for which life cover is being sought. 3. For the benefit of readers, we would like to discuss these four aspects in detail- a) One should keep the liability one is carrying to decide the amount of cover. Still as a thumb rule, 20 times of yearly income till age 40, 15 times of yearly income for age between 40 to 45, 10 times for age between 45 to 50 and 5 times for age beyond 50 only if liability is there . b) With increasing age premium increases and that will remain fixed for the entire term and hence it is better to take early. c) This does not need any discussion d) This is significant as there are two schools of thoughts- i) Liability coverage- Children marriage and education funding, home loan or other loans EMI, income replacement etc. can be deciding factor for liability assessment. Ideally 60 or 65 age can be considered depending upon the person specific needs. ii) Legacy planning– Legacy school of thought suggests coverage of whole life or 85 yrs of age. This is opted keeping in mind that one will not survive till this age and hence nominee will get the life cover amount. This is a personal choice and hence one can go with any of the above two thoughts. 4. Once decided with above nitty gritty there are few important DO’S and DONT’S that must be taken care of- A- Fill the proposal form all by yourself with each and every detail correct B- Pay the first premium or renewal premium from your own account or card C- Disclose all the existing insurance policies D- Mention all your habits like smoking, climbing, racing etc. correctly E- Disclose any ailment or medicine you are taking F- Medicals done by company does not guarantee you claim if anything is concealed and is exposed by the company later on. G- Businessman high on loans are advised to take the policy under MWPA (Married Women’s Property Act) so that interest of the family is not compromised 5. According to a report of last year during 2nd phase of Covid, Life Insurance companies received 218084 claims amounting to Rs. 16921.70 crore. With corona again on the rise in neighbouring countries it is advisable not to delay in getting yourself insured. We buy a phone of Rs. a lakh and spend approx. 2k in cover and tampered glass. A 10 lakhs car attracts insurance premium of approx. 30 k yearly. Just think of your life it is much more precious than your phone and your car. Act now… -By PK Insurance life insuranceterm life insuranceterm plan
Good explanation I am in insurance industry from last 18yrs never seen better explanation on need of term like this. Term plan indeed a great tool to protect uncertainty. Reply
Thanks Mr. Neeraj. Encourage people to take a good Term insurance plan for benefits of their family members. Reply
You have covered all the points of term plan through this article and also made you realize the need of term plan. Thanku Sir Reply
You are welcome Mr. Ravi. You can advise and encourage others to protect their family with a good Term insurance Reply