Time to Bury all Myths about Term Insurance


Posted February 11, 2015 by indianmoney

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Time to Bury all Myths about Term Insurance

A myth is a story or a belief which may or may not be true. Just as you hear myths on legendary heroes and warriors passed on from generation to generation life insurance is also subject to myth. Time to bury myths about a term insurance policy.

You would buy or not buy term life insurance on the advice of friends or relatives and this makes you vulnerable to misconceptions on term life insurance. My friend cannot be wrong. I have followed his advice all my life. But in choosing a good life insurance policy which matches your needs…He might be wrong.

A term life insurance policy is a pure survival policy where if the Policy holder dies, his family (nominee) gets the money (sum assured) promised under the policy. If the policyholder does not die within the term of the policy no money is paid under a term life insurance policy. A low premium is charged.

A traditional endowment life plan invests the premiums you pay in fixed income securities. A Ulip invests your premiums in (shares and mutual funds).These policies are insurance cum investment policies. They have high charges inbuilt in them (paid to agents to sell the policy or portfolio managers who have to invest the money) which is taken from your premium.

You’re better off not paying these charges and investing your money yourself in equity or in fixed income securities.

A term life insurance policy caters solely to your insurance needs which is why you take insurance. Never mix insurance with investment. Pay a lesser premium on the term plan and invest the money you save in a good investment.

f I commit suicide my family’s claim will not be settled

Definitely not true. The Insurer will settle your family’s claim even if you (the policy holder) commit suicide. This holds true only if the term insurance policy has been issued at least two years earlier than the suicide.

If you are alive you need a term insurance policy

A term insurance policy is a must if you are just married or have young children. If you die young, the term policy pays your family the sum assured, and they can meet their day to day expenses.

If you are unmarried and have no dependents your money can be put to better use by taking a health insurance policy. If you are seriously ill a health policy takes care of the medical bills. A term policy would give you the sum assured only on your death which would not help pay your medical bills.

As you grow older a high premium is paid for the term policy. You would have sufficient savings by the age of 55 years to meet most financial emergencies and you do not need a term insurance plan.

If you are married and have no children you can invest your money in fixed income or equity rather than paying premiums on a term life insurance policy.

I will insure myself for twice my annual income

You need to take sufficient life insurance (coverage) across your working years. If you are in your twenties you need a coverage (sum assured) of at least 20 times your annual salary.

If you are in your forties you need a coverage (sum assured) of at least 10-15 times your annual salary. If you are in your fifties you need a coverage (sum assured) of at least 5 times your annual salary.
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Issued By C S Sudheer
Website Time to Bury all Myths about Term Insurance
Phone 02261816111
Business Address No 50, Vinay Arcade, Shanthinagar, Bangalore, India - 560027
Country India
Categories Finance , Insurance
Tags about , insurance , myths , term
Last Updated February 11, 2015