Understanding Term Insurance: Term Insurance is a plain life insurance plan. It is the simplest and most fundamental death benefit plan without any money back or maturity benefits. The Term insurance product is designed for a specified term (between 5-30 years) and provides benefit to the beneficiary if the policy holder dies during the covered term. Financial experts believe that it is the best way of insuring as, the annual premium of term plan is very low and the sum assured (death coverage) is very high in comparison to any other insurance plans. • How is it different from other insurance plans like endowment, ULIP etc.? It is not an investment plan. This plan is designed purely to safeguard your family’s financial protection in case of your sudden demise.
What is an ideal life insurance cover? Many insurance providers make use of calculators to know Human Life Value (HLV). It provides the worth of your life in monetary terms. It determines your Life Insurance needs on the basis of various factors like Income, Expenses, Liabilities and Investments. An ideal HLV calculator takes into consideration the following factors before calculating your life cover: • Annual income required by your dependents in case of your death (excluding any other source of income, if any) • Inflation rate: Assuming an inflation rate of 7% p.a., the value of Rs 10 lacs will be 3.63 lacs after 15 years • Present value of all your investments • Expected return on investment (%) • Number of years that you want to provide income to your family • Any outstanding loans that your family would have to repay Example: Let us consider a scenario wherein Mr. Arpit Gupta aged 30 years, Software Engineer is the breadwinner of his family. He is looking for a Term Insurance Plans and needs to know the ideal life cover that he should opt and the approximate premium that he needs to pay for the same.
Now, before deciding on the life cover, it is also important to consider the inflation rate, present value of his income after 30 years (assuming that he retires at 60 years of his age) and the outstanding balance of loans that he availed and would be paid by his family members in case he dies. • In an increasingly uncertain world, it is your top priority to ensure that your family continues to enjoy financial security and a comfortable lifestyle even in your absence. • The term insurance is a simple and economic way of achieving this objective irrespective of what the future has in store for you. • Your life responsibilities might either be escalated or have been steady. Always protect your family against the extra liabilities of life by choosing the plan option that is best suitable for your needs. [Source: http://blog.bankbazaar.com/term-insurance-a-necessity/]
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