Insure and be Sure

Did you know that the cost of buying an online term insurance policy is 30-40 per cent lower than buying offline?

Insurers don’t have to pay commissions to intermediaries and so they charge you a lower rate.

When gold price corrects by 20 per cent people will queue up at Jeweller’s shop.But, when it comes to more important such as term insurance individuals shy away from it. We know that individuals spend good money in buying gizmos. For instance, a life span of a mobile phone is 18-24 months, yet people spend beyond what is required. Consider a smart phone costing Rs 20,000, with life span of 18 months. It means monthly Rs 1,100 spent on a communication device alone.

Recently my friend’s son-in law passed away following a heart attack at the age of 29, leaving behind his wife, three-year-old child, an unmarried sister and aged parents. Since he was working in a very senior position, he bought a flat one year ago for Rs 95 lakh, with a loan of Rs 40 lakh.

Following nagging by a financial planner, he bought term insurance worth of Rs.1 crore, with a premium of about Rs 9,000 a year (or Rs 750 a month). While his family cannot replace the loss of a loved one, they can at least stay in a house after clearing the loan with the insurance money.

Luxury Vs necessity

The mobile phone may cost individual Rs. 1,100 a month. The insurance, on the other hand, cost only Rs.750 a month, 30 per cent less for a complete protection. Yet, people hesitate to buy term insurance to protect their families.

A brief about term insurance

Term insurance can be taken to cover your life. You can take joint life cover with your spouse or business partners. In Term insurance, you will not get any money on maturity. It will only  cover your life during the policy term.

 The amount of insurance you take will depend on, how much risk you can take and your financial background. For example, a 30-year-old with ancestral property will require less cover than a 30-year-old without financial background. Although there is no standard rule, it is advisable to take a sum that would act as an income replacement for the family. It may be advisable to have a cover which is 10-12 times the annual income. The strategy behind such an advice is that if any untoward thing happens, the claim proceeds can be invested at post-tax return of 7 per cent to meet the monthly expenses.

 An individual must also buy separate term plan to protect his financial goals.

Discuss this with your financial planner.

Pointer: It makes sense to buy term insurance at a young age as the premium is less and the same for the rest of life.

(The author is CEO,My assets consolidation.com he can be reached at suresh@myassetsconsolidation.com).