Clarification to Term Insurance

POSTED BY Gowtham ON July 23, 2013 6:39 pm COMMENTS (3)

I’m a Working professional as an Engineer and aged 22. Just one year Completed till now, getting a salary of 15,000 p.m and i’m looking for an Term Insurance, which is primary thing i have to do for my family Future. Consider my Example which has doubt,
Term Insurance cover of 25 Lakh(assume) for period of 35 years, just consider that i died on 34th year of cover period, my family will get about 25lakh . The value of 1 rupee after 35 years it will be 10paisa (becz of inflation , as you stated in your article somewhere, conversion might be false , numbers are just assumptions). Then my 25lakh after 34 years will not value that much…..
SO my question comes here,
1) Due to value of money changes, whether i need to take Term insurance for first 10years and after that cover expires i’ll go for next 10 years?
2) or else i need to take 1.cr of Term Ins. for 35 years, i this case i’ll be in situation to pay around 26,000p.a(LIC Amulya Jeeven plan calculator). but i’ve to give back 80% salary for debt clearance to my father.
3) Regarding this situation How can i plan my Term INsurance?

3 replies on this article “Clarification to Term Insurance”

  1. Gowtham says:

    Thanks Manish and BanyanFA. Its really useful.

  2. BanyanFA says:

    Manish
    I just love the explanation you gave here. I have been asked this question time and again and I have always maintained a stance that Term Insurance is an external help which is needed till you don’t have your internal financial position in a robust shape. Once you have your assets in place, the sum assured on Term insurance may become immaterial and you could even think about discontinuing it later on.

    Answering one specific query placed here… Gowtham, some insurance companies offer you the facility to go for inflation linked sum assured where the insurance amount increases by specific % every year.

  3. You need 35 lacs today because you have no money with you and no assets . Over next 34 years , you are suppose to build the assets and networth which you family can use. Over long term your dependenace over external help should be reduced by you .

    So dont think so long term . You need term insurance for initial years .

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