Sounds confusing? Well, its fact that term insurance is ‘the best’ among all the life insurance policies. Still not convinced? Here is the answer, what you are desperately looking for.
Mr Malhotra and I were in touch for 15 years, and everybody in our circle knows that he’s quite an investment-savvy person having a very diverse investment portfolio. He used to invest in mutual funds and other market-linked products; however, someone from his network suggested him to go for a unit-linked insurance plan. Spending a good amount of period managing the market linked portfolio, Mr Malhotra happily went for the ULIP. He chose to pay one time premium of Rs.5 Lakhs where the policy term was 10 years and the sum assured under the life insurance plan was Rs.6.25 Lakhs. After ten years, Mr Malhotra was supposed to receive around Rs.8.75 Lakhs as fund value at maturity. Now, you will say everything looks fine here, what’s the mess all about?
Mutual funds and even ULIPs have a certain lock-in period in which you cannot withdraw any amount partially. Mr Malhotra believed that the ULIP would support him providing financial coverage to his loved ones. However, the fact was something different. I asked Mr Malhotra a few questions that made him think on the decision he had already taken-
- If by misfortune, Mr Malhotra meets any unforeseen event of death, will this sum assured, which is less than 10 Lakhs, help his family to survive?
- Mr Malhotra is 35-years old and has two school-going children. Will the death benefit help him fulfil their financial needs for further education?
- Considering the inflation, is the overall fund value enough to take care of household expenses?
- Most importantly, health costs are going high gradually.
This made Mr Malhotra think of the decision he has made. What he did was not wrong, but even not enough for his family’s financial future.
What does life insurance mean?
It is a provision for you to secure your loved ones financial future in your absence. By purchasing the life insurance, the insurance company assures you to pay a particular sum assured to the nominees or beneficiaries. The primary motive of any life insurance policy should always be getting a higher sum assured as possible.
When Mr Malhotra thought of getting another life insurance policy with considerably high sum assured, his insurance agent suggested him to go with term insurance.
Here are some highlights as to how term life insurance can help Mr Malhotra:
- Term life insurance is the most affordable and purest form among life insurance policies. The premium can be as low as Rs.500 per month.
- The sum assured offered under term insurance plans is significantly high when compared to other cash value policies. The ideal sum assured for any term policy is Rs.1 Crore, and you can also go beyond that.
- Usually, term insurance plans do not offer survival or maturity benefits. However, a few insurance companies do come with term return of premium plans that repay the entire premium amount as a maturity benefit.
- Like other life insurance plans, term policies also offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act.
- The claim rejection ratio for term insurance plans is meagre when compared to other life insurance policies.
- Most importantly, term life insurance policies are easy to understand and can be purchased online within a few minutes. Mr Malhotra doesn’t need any broker or mediator to understand the nitty-gritty of the policy.
- Term premium calculators are available on almost every insurance provider’s website and also aggregators. This helps him get the best quote.
Ultimately, Mr Malhotra turned his mind into purchasing a term insurance plan in addition to continuing with other cash value plans. If any uncertainty hits severely, his family will receive around Rs.1 Cr, which will be sufficient to sustain the lifestyle. Else, cash value plans are always there to take care of future financial needs.You also think of your family’s financial future before investing all your money into market-linked products. Buying term insurance is always beneficial!