Term Insurance in 2023: Epic & Interesting way

Last Updated on: 14th January 2023, 08:50 am

This Post helps you to  understand the concept of Term insurance, like who should buy term insurance? What can be the right time to buy insurance? What is the amount of insurance cover and how to buy an insurance policy? and More…

So Hello I am Writevisor and Let’s Understand Term Insurance Policy.

What is Term Insurance?

• So before I jump on to the term of Term insurance, first of all, let’s understand that there are two types of insurances. First one is a life insurance and the second one is a non life insurance. 
• So what does non life insurance cover (General Insurance)  it can cover like a vehicle insurance, fire insurance.
• We are going to talk about life insurance. 
• Always remember that term insurance is a type of life insurance, wherein the insured person covers himself for a specific period of time. 
• If something happens to the insured person within that specific period of time, and if the policy is active, then death benefits (some people might have you heard this word as some insured) will be passed on to the nominee. 
• So I’ll give you a simple example For this, Let’s say Mr. X  had insured himself for 30 years, And if he dies in the 25th year, then what will happen? Will his nominee get a death benefit? 
• Answer is yes.
• we can definitely say that our family members require our love and care, but unfortunate events like death can’t replace that person but surely can replace his income. 
• And that is the sole need. I feel why term insurance is necessary for every bread earner  in the family.

Why Should You Buy Term insurance?

• Now let’s understand who should buy insurance. Instead of me teaching you theoretically one by one let’s try to do a case study based approach right now. 
• Let’s take examples of two people Mr. X and Mr. Y. Now Mr. X has two retire parents, okay. He gets married and his wife is a housewife. 
• And now he has two children. So right now he’s the only bread earner in the family. 
• No person other than Him owns any income  Wife dependent on him children dependent on him, parents also dependent on him. He also has a home loan of 50 lakh rupees. 
• See also  What Is Car Insurance in 2023?: It’s Profit Or Loss?? 
• Now, coming to Mr. Y, Mr. Y is alone, not married? No childrens, Also doesn’t have parents okay. 
• Now, he also has, let’s say one crore rupees of earnings, one crore rupees of investments are readily available with him. 
• Now, you have to tell me an answer, Mr. X, or Mr. Y, who request insurance or who requires insurance? obvious answer is Mr. X.

Who Should Buy Term insurance?

All right. So, in simple words, can I make certain conclusions?

• A person who is the breadwinner of the family must have insurance. 
• A person who doesn’t have a lot of investments, he must have insurance. 
• A person who has debts must have insurance. 
• A person who has a lot of responsibilities like child’s education, he must have insurance.

What is the right time to buy insurance?

• Now, let’s also try and understand what is the right time to buy insurance. 
• Always remember that at an early age, the premium will be definitely less now as in how you grow at some point of time in your life, maybe at the age of 40, maybe at the age of 45 people might start getting attracted with certain kinds of diseases, right? If that be so then your amount of premium is definitely going to rise. 
• So always remember, try to be insured at an early age when you are absolutely healthy fit fine, so that your amount of Premium always remains on a lower side.

What is the Amount of insurance Cover?

• Now let’s move on to how much should be your amount of insurance cover. 
• But I think before moving on to that, I would like to add one more point in the previous discussion. 
• See why having an insurance at an early age is important. 
• Assume that you’re 25 years of age right now, if you if you take out your insurance policy and assume that your premium amount is x rupees, okay? And assume that you’ve insured yourself for 35 years till the age of 60, your insurance premium amount at the age when you’re 25, and your insurance premium amount, even at the age when you’re 60 That’s going to remain the same right. 
• So, that is why I told you earlier, the better I hope this point is clear.
•  Now, moving on to the next point, which is how much would be the amount of insurance cover you know, there is no law, there is no exact rule that they should be or amount of cover, but as a thumb rule, we can say that on an average minimum amount should be 10 times of your annual income. 
• So, assume that I earn 10 lakh rupees per year assume then I should be having an insurance cover of one crore rupees, right. So, one more time if my annual income is 10 lakhs then one crore rupees should be my minimum amount of insurance premium. 
• But if you say this is like minimum what could be an optimal or it could be 15 to 20 times of your annual income.

Comparing Term Plans With other plans

• Now, let’s do a wonderful comparison of term plans Vs other plans . And let’s try to understand which one can be better for whom. 
• So let’s say your whole intention is to look at insurance from a pure protection point of view. And you’re not interested in insurance from an investment perspective. 
• In that case, what will be our priority, your priority will be that getting a big amount of insurance cover with the lowest possible premium. 
• So always remember that term plan is the cheapest and the most efficient way to cover the life of a person. 
• So just to give you an example, visit any insurance  website, when I tried to input certain data like for a 30 year old individual who wants an insurance cover of 25 lakhs rupees for a tenure of 25 years, then I found that the approximate premium amount was 4000 rupees per annum. 
• But if I were to compare it with other types of insurances like an endowment plan or a whole life plan, then in that case, the premium amount was almost four to five times higher.
•  Of course, remember that based on the medical condition of that person, or other conditions, this amount of premium can be a little bit plus or minus.
• Well, for a pure term plan, it’s very important to note that there is no maturity benefit at the end of the insurance term. 
• So just to give you a simple example, let’s say a person has insured himself for 30 years, and he’s paying the premium for the entire tenure without skipping even one installment. 
• And he does not die between those 30 years, but he dies in the 35th year, 
• Will his nominee get any amount as a death benefit?
• Answer is No !
• What about the amount of premium paid? Will it be refunded back to his nominees? Again, Answer is No. 
• Of course, I’m talking about a pure term plan. But if I’m comparing this with other types of insurance policies like endowment plan or a whole life policy, in that case, what will happen is that you will get a sum assured as a death benefit. 
• Plus, you may also get certain bonuses in this case. 
• So that’s the whole point. Why are you taking the insurance? Is it only for the purpose of getting a cover? Is it only for the purpose of covering your risks? If yes, then term plan is best. 
• If you’re looking at insurance from an investment perspective, also, then you may think about something like an endowment plan or a whole life plan. 
• And the last question, which remains in our mind, is that will I get a tax benefit on the amount of premium paid?
•  Answer is yes, whether it’s a term plan or any other type of life insurance plan, you will get a tax benefit under Section 80 C.
• According to one of the reports by economic times, they believe that the term life insurance premiums are expected to rise again in financial year 2022.
•  In fact, they had increased the premiums by up to 20% in the previous year on the back of rising insurance claims because of COVID-19 So I feel that if this really be so there are chances that from first of April insurance premiums may rise up to 20% even in this year as well.

Conclusion

• But from now on you have come to know that what is Term insurance, what are its benefits. 
• How can this benefit you in the long term, especially in a future that you may not even be aware of, then God forbid it should not happen to anyone, but still, if you are very concerned about your family and your home. 
• If there is more stress in your mind, then keep it by taking insurance of the best so that your stress ends because there are some things which are not in our hands and if you feel that often people keep telling you this and you have
•  The answer is whether you have to take the risk or not because we have given you a lot of information.

Reference