Why is Term Insurance so Important in Life?

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Why is Term Insurance so Important in Life?

• Life is uncertain and none of us are sure what
  the next moment holds for us. But in our own way
  and style all of us keep attempting to minimize
  the impact of unpleasant and unforeseen
  situations in our life. Untimely or sudden death
  of the sole bread winner is one unpleasant
  situation which can have drastic consequences for
  the members of the family who are left behind.
  The emotional trauma together with the financial
  distress can take a toll on the peace of mind of
  the family members. Nobody would ever want to see
  his family members and dependents in such a
  situation and one of the ways to circumvent such
  circumstances is to buy Term plan.

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• How Can a Term Plan Help?
• By buying a Term Insurance one can be Assured
  that family members and dependents do not have to
  face such a depressing condition. A term plan is
  a plain vanilla insurance policy. It pays to the
  nominee the Sum Assured guaranteed by the Policy
  if the Policyholder were to die during the policy
  term. Term plans are available for various
  tenures. The tenure decides for how long from the
  date of initiation of purchase of policy the Risk
  cover will be provided. Most term plans offer
  risk Coverage till the Insured reaches the age of
  65.

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• Term Insurance versus other Insurance PoliciesA
  term plan is more assuring than other formats of
  insurance policies sold by insurance companies. I
  would suggest that before you buy a unit linked
  insurance plan (ULIP) or an Endowment Plan make
  sure that you have a term plan before that. A
  term plan is more important than an endowment
  plan or a ULIP. Term Insurance Offers Higher
  Risk Coverage for a Much Lower AnnualPremiumThe
  fundamental reason we all buy an insurance policy
  is because we seek financial protection for our
  family. Investment is only a secondary reason. A
  term plan fulfils the basic purpose much better
  than an endowment plan or a ULIP.

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• It is fair to assume that the amount of Premium
  that an individual can afford to spend annually
  towards insurance policies is limited because of
  limited amount of savings that are available. If
  you think that the amount of risk coverage that
  your family needs is 50 lakhs, there is no reason
  that you should compromise on this number. If
  you choose to buy the same amount of insurance
  coverage using a ULIP or an endowment plan the
  amount of premium that you would have to spare
  annually would be somewhere close to Rs 5 Lakhs.
  I would say that majority of people would be
  simply taken aback with this number and would
  never think of buying an insurance cover.

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• But if you choose term plan instead the amount of
  premium that you would need to spare annually
  would be just a few thousand rupees. The
  difference in the amount of premium is
  essentially because a ULIP or an endowment plan
  invests most part of the premium amount in equity
  or debt while it reserves only a small part of
  the insurance premium towards providing risk
  coverage. The entire premium that you pay for a
  term plan is utilized to provide insurance
  coverage. Besides, you also save money on several
  other accounts like fund management charges,
  policy administration charges and premium
  allocation charges. All these charges put
  together are a significant drain on the value of
  the premium you pay to the insurance company.

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• Thus, you can see that a term insurance has its
  own importance and it remains the ideal choice
  for those who buy insurance policies primarily
  for risk coverage. Besides, a term plan being
  uncomplicated in structure it is easier to choose
  term plan. You can simply log on to an online
  comparison site and choose term plan that offers
  you the highest sum assured and maximum tenure
  for the minimum premium.
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