Take a look at this shocking fact, Only one in five Indians has term insurance. Term insurance is a type of life insurance plan and is pure risk protection. You pay a premium for a sum assured under the term life insurance plan. If a policyholder dies within the term of the plan, the nominees (wife and kids) get the sum assured called the death benefit. Term life insurance offers no survival benefit.
You may avail endowment life insurance plans for insurance and the savings benefit and ULIPs for insurance and investment benefit. Then there are the tax benefits. The main purpose of life insurance is risk protection. It serves as a safety net when you are not around. Endowment plans and ULIPs offer low mortality cover compared to term life insurance. When it comes to protection for your family, nothing beats term life insurance.
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The India Protection Quotient or IPQ is the degree of protection you (person) experience from uncertainty, on a scale of 0 to 100. The IPQ stands at 35. This is very low and India badly needs risk protection. These were the results of a study conducted by Max Life Insurance and the market research firm Kantar IMRB. The factors considered are awareness on life insurance, level of preparedness for a future uncertainty and the level/degree of preference for pure protection plans like term life insurance. What does this mean? Indians badly need term life insurance plans.
Term life insurance is the basic and cheapest form of life insurance. Indians badly need term insurance and must understand the value term life insurance offers. Term life plans protect your family against the uncertainties of life.
What do you understand from the results of the study by Max Life Insurance and Kantar IMRB? Indians badly need term life insurance and the life insurance industry must play its part in bringing term life insurance to the masses.
See Also: Best Term Insurance Plans In India
The survey by Max Life Insurance and Kantar IMRB shows Delhi scores the highest when it comes to the protection quotient. Sadly, Pune and Bengaluru which have a lot of millennials, highly educated professionals and techies, fares badly when it comes to protection quotient. This shows that being tech savvy alone doesn’t mean you would avail term life insurance. You need the right attitude and love and care for the family, to avail term life insurance.
What about millennials in the age group of 25-35 years? Well, several youth in India love to spend heavily on luxury goods and travel. Many youth avail personal loans to go abroad on holiday.
Sadly, many youth don’t care about basic protection for their family. Their families suffer financial hardship on an untimely demise. Worse, according to the study, just 44% of the youth were aware of term life insurance and a measly 17% had availed a term life insurance plan. Another shocking fact; around 22% of Indian youth don’t avail life insurance because they have other investments.
See Also: Life Insurance Policies
When millennials become parents and have kids, they save for children’s education and marriage. This is when they avail term life insurance to secure financial goals. Millennials with kids are aware of term life insurance and may avail term life insurance plans.
You must have seen several advertisements on TV, newspapers and the internet asking you to avail term life insurance of Rs 1 Crore at XYZ premium. Is term life insurance of Rs 1 Crore enough even though the premium is what you spend on tea each month?
Yes, the magical figure of Rs 1 Crore sounds great, but it may not be enough for your family. On an early demise, financial damage can be catastrophic. Children’s education, marriage and spouse’s retirement are affected. There are the home loans and other liabilities to consider.
This formula should help you calculate the term life insurance you need:
See Also: What is a Term Insurance Plan?
The Term Life Insurance You Need = Annual Income * Multiple Factor.
The multiplying factor takes into consideration the entire future income impacted on an early demise. The entire future income of the breadwinner is considered in the multiplying factor.
Consider a multiplying factor between 15 to 20 as a thumb rule to calculate life insurance cover required.
Let’s say you earn Rs 10 Lakh income a year. The ideal term life insurance cover you need is Rs 10 Lakhs * 20 is Rs 2 Crores. You need a term life insurance cover of Rs 2 Crores, instead of Rs 1 Crore. Sorry, the magical figure of Rs 1 Crore term life insurance doesn’t work.
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