Many people say about life insurance that it does not get attractive returns and it comes with the responsibility of paying premiums for a long time. In fact, today we are going to talk about what the general public should be aware of about life insurance.
Only a few years ago, only the breadwinner of the family was insured. Even then, people believed that there was no need to take a policy because nothing was going to happen to them. To be honest, most people today have the same thinking. That is why many families are reluctant to take adequate life insurance cover. It is important to remember that life insurance is necessary where there is life.
There are two types of life insurance policies:
- Pure/Term Insurance
- Endowment insurance
Life insurance is not just for risk against death. If that were the case, it would be called death insurance. Life insurance is for both premature death and longevity. Term insurance is for premature death and endowment insurance is an option to provide regular income in case of long life (long life after retirement).
“There is still a long way to go for what I need to plan for retirement from now on,” people say. This statement of his is also full of misunderstandings. At one time pension was a term associated with employment. Therefore, the financial provision for retirement was automatically made. With the passage of time, the provision of pension has gone out. The endowment plan is becoming a popular option for maintaining a regular annual income in the post-retirement years. It is worth mentioning here that this plan is also to be taken according to the standard of living of every person, not just as a small savings.
As you may know, in this budget, the government has increased the limit for FDI in insurance. This provision will make a big difference in India. Even today, the number of people taking out life insurance in India is very low. People are running away from life insurance agents. Now due to FDI, professionalism will soon enter the field and the industry will get a respectable place. Policies will no longer be ‘sold’, the policy will ‘protect’ the people. Life insurance is based on the ‘human life value’ of each person. Indian families now need to know that the Insurance Regulatory and Development Authority is making special efforts to provide insurance cover based on the human life value of each individual.
Life insurers are now also offering single premium annuity based plans. The policy is to receive the amount of annuity after paying a single installment of premium. You can opt for the annual income after five years by paying a single premium today. The peculiarity of this plan is that there is no longer any obligation to pay premium and the annuity you will get will be at a much higher rate than today’s rate. Given the current situation, it is important to have a clear understanding of insurance and to plan for the coming years to meet your financial needs, rather than running away from a life insurance agent.
Question: I am thirty years old. We are a husband and wife and a five year old daughter. I am paying EMI of home loan and car loan. How much life insurance should I have today?
Answer: The amount of insurance cover you should have depends on your standard of living and your human life value. Let us understand this by an example. If your monthly salary is Rs 30,000 then it is Rs 3,60,000 per annum. Assuming your retirement age is 60, you still have 30 years to work. Thus, if you work for 30 consecutive years, you will get an income of 1 crore 8 lakh rupees. In this amount you also have to take into account the rising cost of living in the heat of the year and hence the figure goes up. There are many online calculators available to calculate the human life value. You can divide the value into two types, term insurance and endowment insurance and take insurance cover based on that. The purpose behind term insurance is to maintain the standard of living of your family in your absence, while the purpose of endowment is to maintain the standard of living in the life after retirement.