Page 76 - Life Insurance Today July - December 2020

Term insurance: Splitting your plan

can optimise both cover, cost

F ear often pushes people to buy family must have a term insurance How much should your

cover. It should be taken as a
insurance. Over the last six to
insurance cover be?
eight months, as the pandemic
take care of his/her family’s financial
severely impacted the economy and protection instrument that is able to Typically, a term plan should cover all
forced individuals to restrict spending, needs after he/she is not around. The your liabilities and major expected
the insurance sector saw a sharp rise key to remember is that anyone who future expenses such as higher
in demand for term insurance plans has a family to take care of, and has education of children, their wedding,
and premium collections. In October, liabilities such as a home loan, car loan and the living expenses for your family.
the first-year premium of private etc., must have term insurance. Suppose you have a home loan of Rs
insurers grew 23.56% to Rs 7,227 50 lakh, with principal outstanding of
crore, and that of LIC grew by 36% to It is also important to note that you Rs 40 lakh; a car loan outstanding of
Rs 15,548 crore. should not wait to hit a certain age to Rs 3 lakh; and you need Rs 20 lakh for
buy a term plan. You may do so after your child’s higher education, then
Four different announcements on the you start working, and keep adding to your term plan should cover for all this
success of Covid-19 vaccine candidates the cover based on additional until you turn 60. This should be apart
over the last two weeks have lifted requirements. Starting early means a from the cover amount that would
market sentiments and fuelled hope lower premium for the same cover. For provide for your family’s household
that the virus may be about to be example, if you are 30 when you buy expenditure needs after you.
defeated, and life could soon return to a Rs 1 crore term plan up to age 70,
normal. Pfizer-BioNTech, Moderna, your annual premium would be around One must ideally have term insurance
and Sputnik V have announced an Rs 12,000. The premium for the same cover until the age of 60, and can have a
over-90% efficacy for their candidates, plan will be around Rs 21,000 if you separate plan to provide for one’s
and Oxford-AstraZeneca has said early buy at age 40, and over Rs 32,000 at spouse’s financial independence till the
results of phase 3 trials show its age 45. age of 70-75. Breaking your term plan
vaccine to be “highly effective”.

While Covid-19 has increased
awareness about insurance, it is
important for everyone to understand
that it should not require a global
pandemic for individuals to be nudged
to buy a policy. A term insurance plan
is a fundamental requirement and
forms the base of an individual’s
financial planning, providing cover
against the most critical risk — that of
life itself.

Who in the family should
buy term insurance?
The primary earning member of the

76 July - December 2020 Life Insurance Today