When it comes to securing things , we do a great job by securing our Rs.15,000 mobile phone with a tempered glass worth Rs.500 and protective cover of Rs.700. But , how may of you show the same interest in protecting the value of your life? How may of us does know that even a Rs.500 /month can get you a life cover of 1 Crore.
We all have a reluctance towards spending money on insurances , unless the legal authorities compel for the same as in the case vehicle insurances. Since, insuring your life is not a mandatory stuff in India, only around 25% Indians have life insurance policies. Do you think only 25% of Indians can only afford? Never, its only because of the poor financial education of our system. Funniest part is that , some of us doesn’t even know that insurance is more on to protection rather than a calculation of returns on our death.
When it comes to life insurances , it is like selecting car. We have hundreds of options, out of which primary thing is whether we want petrol car or diesel car. Similarly, there are hundreds of insurance policies which can be primarly categorize as one with returns on maturity and other without returns.The one without returns is called as term insurance plans and other with return is called as endownment plan .
What is term insurance plan?
This is where you can insure your life for a certain term by paying an nominal amount .The payment can be monthly ,annually, lump sum or for certain number years at the starting. Term can be in the rage of 5 years to whole life and coverage can be from few lacks to crores. The premium to be paid varies according to your choice for term and coverage amount. The main attraction of the term insurance is that you get a huge coverage for small premium, even Rs.4000 per annum can you give a cover for 50 lakhs. But, keep in mind that once the term covered in policy is over, then you won’t get anything in return.
What is endownment insurance plan?
Endownment insurance plan work exactly same as the term insurance with an increased premium and a guaranteed return in the maturity. This can work as both insurance and investment. But ,it will not be affordable for everyone as easy as the term plan for bigger coverage amount.The disadvantage of endownment plan is that, the life coverage will be till the maturity , which will be between 10 to 25 years normally.
The two most import aspects of selection of the policies are the coverage amount and insurance company.Coverage amount should be an ideal amount that your dependents should get for a financial stability at your early demise. And you should select an insurance company which have a policy settlement ratio of more than 98%. The settlement ratio is the proportion of number claims approved by the company to the number of insurance claims.
As you can opt for ABS and air bag for the cars, you can opt for accidental riders and critical illness riders for the insurance policies with payment of additional premium. Accidental rider is an add-on which helps to get additional coverage on accidental deaths and critical illness rider help to get financial support at the time of diagnose listed critical illness as per the policy.
Now, its your turn to say a yes or no towards the life insurance. If it is a yes , go head with the permutation and combinations of the required coverage amount, term and your income. As per the ideology of the economists, its always better not to mix-up your protection and investment.Always try to get a better life coverage using a small premium of the term insurance and invest the balance in other productive financial instruments .
More than the financial protection at the death, there is always a psychological advantage involved in it.This is one of the rare scenario where you virtually buy peace of mind using liquid cash…….