I remember having read recently that the frequency of traffic collisions in India is amongst the highest in the world. Every year more than 135,000 traffic collision related deaths are reported in India (Source: National Crime Records Bureau, India). But what is not reported is how many out of these 135,000 had a life insurance policy? What is also not reported is the plight of the family members whose sole bread earners would have died in these accidents. How would the financial future of these family members would be taken care of?
Considering the low life insurance penetration in India, it can be assumed that most of the victims out of these 135,000 people who met with unfortunate deaths would not have bought life insurance!
Though the Indian Life Insurance sector is biggest in the world with about 360 million policies and expected to grow at 12-15% over the next 5 years, the penetration of Life Insurance in India compared to its huge population is only around 3.4% at the end of the financial year 2015-16! According to the last Swiss Re’s last sigma report the penetration was only 3.30% in 2014-15. With the expected growth rate as mentioned above, the penetration will still be only at 5% level by 2020.
Insurance aversion in India is a common phenomenon. While some lack the basic knowledge, others do not know why, how and what to buy. People do not understand that life is precious and they should enjoy it to the fullest. When we are young and have a good earning, life looks good and we try enjoying it to the fullest. With age comes responsibilities – we get married, have children and aging parents dependent on us - this is when we start feeling the pressures of life.
This is when one should think of providing financial protections to their family. But, people are not aware how to approach this problem. Mass population in India does not know that this problem can easily be addressed by simply taking a term life insurance plan by paying a very small premium.
Term Insurance plans in India are the most basic and cost effective Plan which one must have. Term Insurance Plans are basically protection plans and designed to financially protect your family from unforeseen circumstances that may arise due to your sudden death.
A term insurance plan is a plan of insurance which is taken for a specified period. During this period, called the plan term, if the person whose life is insured dies, the sum assured is paid to the nominee. The sum assured is the amount of cover which is chosen at the time of buying the term plan. The benefit under the term insurance plan is payable only on the event of life assured’s death. If the plan completes the stipulated term and the person insured is alive, the plan matures. On maturity, no benefit is paid as the life assured is alive.
Therefore, term insurance plans are pure protection insurance plan which provides coverage against the risk of death. Any other risk, like surviving till maturity, is not undertaken and no benefits are paid in case of such risks which are excluded.
Term Insurance plans also come with various riders in order to make it more rewarding such as accidental death and disability rider, critical illness rider, monthly income rider etc.
Leading Insurance Advisors and Financial planners suggest one should take minimum life cover of around 12 times of annual income. Therefore, if your annual salary is Rs 8 Lakhs then you should take a minimum life risk cover of around Rs 1.00 Crore. This is simply because if your family members get Rs 1.00 Crore on the event of your sudden death, then they will be able to comfortably carry on with their lives by earning approx 8% on the amount received from a safe investment.
There are various types of term insurance plans available in the market today. Let us understand some of the variants:
Along with term insurance plans, Companies do offer life insurance riders which help customize your term plan and make the coverage comprehensive. A rider is an additional clause which can be added to your base term insurance plan to increase the scope of total coverage. Riders come with a nominal premium. Riders pay benefits only if the event against which the rider is availed happens and there is a separate rider coverage which usually coincides with the base sum assured cover. Some common riders which can be added to a term insurance plan are as follows:
Conclusion
As we all know life is very unpredictable nonetheless we can establish a solid foundation for a lifetime of financial security and peace for our families by buying a term insurance plan. We have seen the type of critical illness covers and riders available with a term insurance plan and how if taken can work as a comprehensive life insurance plan. Our primary goal in life is to see our families secure, safe and happy all the times. Term insurance plan is the best insurance option which provides your family with an umbrella of security.
Insurance is the subject matter of the solicitation..
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