After being in business for almost 2 decades some companies have realized that term insurance is profitable after all! However, knowledge does not lead to wisdom. Wisdom leads to knowledge seeking!
So people like me have gone around the country saying “Term insurance is good” so the life insurance industry has some 20 varieties of term insurance – and of which only one is good! This is like saying “because potatoes are good for you, French Fries are healthy”. Of course it is not healthy. Base product is healthy, does not mean that the derivative is healthy too. Be careful.
Term insurance is not because you will die, it is because your family has to live. You take term insurance to fill in the cash flow gap between what your goals are and what you have accumulated. In most cases the accumulation stops by the time you reach 55 years of age. Theoretically it means you do not need to work beyond the age of 55, but you may continue to do so.
CLEARLY THE CASH INFLOW AFTER 55 YEARS OF AGE IS UNNECESSARY AND ALMOST FOOLISH.
So if you are a 22 year old taking a life insurance you should take it for 33 years, and if you are a 42 year old taking term insurance, you should take it for 13 years. Taking insurance beyond the period that you are earning is nonsensical.
You have to understand that the pricing is prohibitive if the term insurance is till your age of 100 – then it is a whole life policy masquerading as a Term policy because some of us have sunk it in your head that “Term insurance is best”.
Take term insurance, buy it online, buy it from the cheapest source, and take it ONLY till your age when somebody is dependent on you and you have not yet provided for that. For most people that could be 55. However, if you are a doctor and have at age 55 taken a Rs. 4 crore loan to buy a new place of work…it is obvious that you need a new term cover for this amount.
There are no easy answers, but you have to find the right answers for yourself. You can do this by reading or asking or taking the advice of an agent. Make your choice.
Do not buy a Term insurance with return of premium.
Do not buy a Term insurance plan with a limited paying term – pay for 5 years and it will be valid for 20 years type. It is expensive and the purpose is lost. You cannot discard it after say 5 years if you don’t need it. You are paying the premium upfront, that is all.
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