Why should I opt for a term life insurance when I will get nothing after the expiry of its coverage period.
This is an excellent question.
First you understand the concept of life insurance, life insurance have two parts i.e. mortality and investment. Mortality charges are not reimbursable while the investment part is reimbursed along with interest. However, it is never disclosed and bifurcated under the policy so the consumer is not aware about these charges.
Under term life insurance only mortality is charged so it is called pure life insurance risk plan and the sum insured is payable only to your family after you.
Term Insurance is required to meet out your liability after you so that your family or/ and dependents don’t become in financial difficulties in case of sudden & unexpected loss of your income due to reasons like accident, disability, critical illness, death etc (god forbid). The Insurance amount provides your family financial cushion to meet the monthly household expenses and maintain a similar lifestyle.
In Term Insurance Policies you don’t get anything if you survive the policy tenure, hence its premium is lowest amongst all insurance products. Treat Insurance premium paid like expense and not as an investment carrying a maturity value/return.
However, there are some products in market which provide some returns on maturity but these products have higher premium out go.
Let me give you some examples; Why do we pay annual premium for Car Insurance while the claim is payable only after the damage of car in an accident. We never received any thing back on the expiry of policy. Similarly, the premium paid for health insurance also does not give us back anything if we do not get hospitalized.
The reason we are okay to pay for health and car insurance and not expect anything back in return is that there are no products which give us anything back. And the reason why nothing can be given back in Insurance products is that Insurance premium is an “expense” to protect yourself against the risk.
What is the risk of protection in health insurance
The fact that you may face a medical condition which necessitates hospitalization for which you might have to suddenly spend a lot. So health insurance protects any sudden outflow of funds in case of a medical situation.
Similarly, term insurance is intended to protect your earning capacity and future liabilities if any thing happened in wrong with your life . Term insurance is to ensure that all your future liabilities (child education, the retirement of spouse etc) is taken care of even if you are not there.
Therefore any premium paid to insure yourself should be treated as an expense. However, the term insurance coverage is also needed to be adequate because the paltry sum will not help your family in any way. Choose a term insurance plan on the basis of your family need and expenses but it also depends upon your annual salary that how much coverage you will get.
You should take a term insurance coverage minimum 20 times of your annual salary.
To know more about the term insurance you can visitwww.cover360.in
You may not need term insurance cover if:
1.You don’t have any financial dependents like non earning spouse/parents/ children i.e. no one will be financially impacted by the loss of your income
2.You have a biz/source of income which can generate money without your involvement
3.You have enough financial savings to enable your dependents to survive and maintain a decent lifestyle.
4.If you and your family are financially strong.
Hope this has helped you get a perspective.