Life insurance is term insurance

April 15, 2023 8:17 am46 commentsViews: 173

I already have a life insurance policy. Then why should I buy a term cover?Thereis a common misconception; that only life insurance is sufficient risk cover; and that it isequal to getting a term insurance. But in reality havingonly a life insurance policy is highly unlikely to provide you adequate cover from the various risks; and in order to cover this deficit getting an additional insurance such as a pure term plancould be the answer.

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Hereiswhy you need a term insurance policy even if you have a traditional life insurance policy-

1. So that your family is financially protected no matter what

Mishaps come unannounced and we try to be as much prepared as possible for these events and have sufficient cover for your family at all costs. However traditional life insurance plans offer a much lower cover generally around 10-20 lakhs only as compared to a term insurance plan which easily offers comprehensive protection of around 1 crore or more; at comparatively much lower premiums. But in such a situation most may need to take a break from work; resulting in loss of income for their family; added with other expenses such as humungous doctor’s bills; hence thethe safest thing to do is toget adequate cover- by getting a term plan with the specific riders along with the life cover you already have.

2. Life insurance plans are savings plans, a term insurance is a protection plan

Insurance is essentially taken for the protection of your family. But life insurance plans while providing insurance cover or a pay out of a certain sum of money either at death or after a set of years; will not be able to cover all your needs completely. This is because in a life insurance policy to provide a pay out on maturity; needs to re-invest a certain component for saving purpose; and this is why the premiums are much higher than term plans with have much lower premiums and provide more cover. In fact life insurance is also sometime referred to as permanent insurance or cash-value. So for instance:

• If you buy a term plan like the ICICI Pru iProtect Smart –at the age of 30; for another 30 years the premium will be only Rs 8000/- per year and it will provide a cover of Rs1 crore in case of specified mishaps.
• But generallya life insurance policy – bought at the age of 30; also for another 30 years; can havea premium as high as Rs. 16,000/- per year or more with much lesser insurance cover.
Sofor fulfilling your actual insurance needs you may also need to get a term plan which is a pure insurance instrument.

3. Suitable if you have taken loans

If you have taken a large loan such as housing loan, car loan etc; then a life insurance policy will not be able to provide security to your family, but a term insurance will. For example- you have taken a housing loan for 10-20 years, you can with thisalso take a term policy of corresponding value; and link the premium payable to the outstanding principal of the loan. Over a period of time;as the outstanding amount decreases; both the tenure as well as the insured amount will also decrease. This helps insure the family; as in case of death of the primary earning member who is repaying the loan, the family does not lose the home; as the insurance company will repay the outstanding loan amount.Hence a term policy which is cheaper than the other types of insurance; can helpcover the risk of dying before repaying all loans.

4. Critical illness can result in major expenses-

You have taken a life insurance policy which will take care of you or your family’s needs at the later stage in life. What about the time in between? Unfortunately the incidence of expensive chronic diseases is higher today for not only elders but youngsters as well, starting as early as even 35 years of age. Hence with a rising cases of critical illness in the country; you might also have taken a mediclaim policy, and feel that this is enough to sustain you during such mishaps; but sadly this too may not be enough. Getting treated by a doctor today has become very expensive and a critical illness brings with it an array of unexpected expenses besides hospitalization. In this case a health insurance plan; such as a term plan which comes with a host of riders including critical illness cover, waiver of premium and income benefits; can adequately help you financially.

In conclusion while getting a life insurance policy may offer a component of savings on maturity; in today demanding and highly uncertain environment with escalating expenses; getting a pure insurance like a term plan has become a must for anyone. Also as it offers a great sense of relief and is much easier to obtain when you are healthy; it is best to take as soon as you can; and secure you and your family’s future.

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