How to choose the right term insurance plan for yourself

They are well educated, have access to latest information and are very tech savvy. Yet, a recent survey conducted by Max Life Insurance and Kantar IMRB shows that millennials score low when it comes to money matters. Only 45% of the respondents aged 25-35 have heard of pure protection term plans and barely 17% have bought such insurance policies. “Millennials follow the YOLO (You Life Only Once) principle. They want to spend on fine dining, latest gadgets and costly garments while the need to buy insurance is put on the backburner,” says Vineet Arora, Managing Director & CEO, Aegon Life Insurance.

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Why aren’t millennials buying enough protection for their families? “Many young people don’t have any immediate liabilities or dependents so there may be no need for insurance. Others want to spend on tangible things that drive immediate gratification instead of focusing on the longer term,” says Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.com.

Buy now to avoid paying more later

Premiums of Rs 1 crore insurance cover till the age of 65

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Premium rates of Aegon Life Insurance e-Term Plan for male non-smokers; premium inclusive of GST

This is both worrisome and perplexing. Life insurance forms the bulwark of a good financial plan. Everybody needs an insurance cover that can effectively replace his income after settling all outstanding debts. Sole or primary breadwinners without adequate insurance are playing with fire. The good news is that term plans are ultra cheap if bought at a young age. A 30-year-old man will pay barely Rs 9,000 a year for an insurance cover of Rs 1 crore till the age of 65. Delaying the purchase doesn’t save you any money. With every year of delay, the overall cost climbs up (
see graphic).

Want to pay once or annually?
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How it helps: Though costlier, single premium suits those who are not disciplined and might miss renewal deadlines. Useful for buyers who can spare money now but may not be able to pay later.

Spoilt for choice

Ten years ago, Aegon Life Insurance launched the first online term plan in India. Almost all insurers now offer such policies with additional features. There are single premium plans, limited premium payment plans, increasing cover plans, staggered payout plans and even plans that return the entire premium if you survive the full term. Each of these variants is useful in certain situations. While this profusion of choices is good news, we believe it can also become a problem. It could be that many millennials have not been able to decide which policy to buy. Our cover story aims to cut through the clutter and help readers choose a suitable term insurance cover.

Choose the right term
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How it helps
: It doesn’t cost much to extend the cover to beyond the working years of an individual. But it adds the possibility of a moral hazard where the individual’s death is seen as leading to a big gain.

To be fair, a small but growing number of millennials understand the need for protection against unforeseen events. Meet Ahmedabad-based finance professional Ketan Shah (see picture), who has bought a cover of Rs 2 crore. “I needed an insurance cover big enough to take care of all liabilities at an affordable cost. This term plan fits the bill perfectly,” he says. Read on to know how you can also choose the right policy for yourself.

Ketan Shah, 30 years, Ahmedabad
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Income: Rs 1 lakh per month

Insurance cover: Rs 2 crore till age 65

Premium: Rs 19,000 per year

“I drink on social occasions and mentioned that in the form. It has bumped up the premium slightly but leaves no chance of claim rejection.”

How much cover and from whom?

As mentioned earlier, the insurance cover should be able to replace your income and settle outstanding loans. The thumb rule is to be covered for at least 8-10 times your annual income plus any outstanding debts. Buy from an insurance company with a healthy claim settlement record and a good reputation for customer orientation. When he was buying a term plan, Pune-based software engineer Nitin Gawade (see picture) chose the insurer on the basis of the claim settlement record……Read more>>

 

Source:- indiatimes

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