term insurance – when to take?

POSTED BY Ramprakash ON March 17, 2012 3:54 am COMMENTS (4)

I am 30,male. Trying to understand the concept and rational behind premium calculation.

Lets say God visits me today and assures that no matter what I cannot die in next five years. Doesnt mean I will die in the sixth year!

In such a case should one still take the term policy today or after four years. [4=5-1; 4 rather than 5 so that if the policy is 1 year old, claim is less suspicious ]

I am trying to understand which one will be more cost effective in terms of the total premium payout during the entire policy period,as the annual premium cost rises if taken at an older age.

No. I am not trying  to predict my death as that would defeat the very purpose term policies are for.

Just trying to understand a few things. As at a lot of places on net I have seen that queries raised by 50+ year olds who havent taken a term policy and wanting to take one often answered as – it should have been taken when you were young (30). At this age premium is too much. But to a layman like me,if he is still alive,he has saved premium for twenty years and so I dont see a negative in taking a term policy at 50.

I think to get a mathematical answer (to which one is better) one will have to find the premium he would have paid till date and its rupee value in todays date and compare it with the premium he will have to shell out if he takes a policy now and all the future premiums for the policy period. And these future premiums will then have tobe computed at todays rupee value. Not sure if I am thinking on right lines.

Ofcourse I dont know if insurance companies do give term policies to people in 50-70 year bracket.

4 replies on this article “term insurance – when to take?”

  1. BanyanFA says:

    Hi Ashal,
    I think you brilliantly summed it all. Better get it now then repent when you are no more there. It is cheaper to get a term insurance when a person is young then later.

    Regards
    BFA

    1. Dear BanyanFA, thanks for the kind words.

      Thanks

      Ashal

  2. Dear Ramprakash, let me try to answer you. W’d you purchase the umbrella when it’s already raining or w’d you purchase one even when there is no rain but only possibility of the same.

    Please answer it.

    Thanks

    Ashal

  3. Ram Sir. Hope you live for 100 years.

    Well Comming to Term Plan: I say not everybody needs insurance. If you dont have any commitment, no body is dependent on your family, Then insurance is waste for you.

    In a country like ours where relationship matter the most. Very few fall in above category.
    Now when is the right time : If you are married and dont have Term Plan than you are in critical zone. The first thing you need to buy is term plan. With years your investment will grow
    and your family can servive with the investments, then you can think of stopping your Term plan.

    Summary: At 60 you may not need insurance, your kids would be grown up, your repsonsibility by then would be less. You would almost be retiring.

    Take away is Untimely death of bread winner should not lead your family in financial crisis.

    How much Insurance : Ballpark figure 10 time your annaul Gross salary. Dont think too much if you want to go for 12 times go for it.

    Tip: Go for company that have decent settlement rate. Split your insurance with two providers.

    Hope i am clear.

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