Rapid advancements in technology and emergence of new diseases are both contributing to the ambiguity and volatility in the global economy. Newer technologies make employees redundant leading to loss of income and opportunities whereas unknown illnesses can snatch away a family’s breadwinners.
Life insurance policy is the only known comprehensive risk mitigation solution that can financially safeguard your family against economic upheavals from an untimely death. The type of life insurance plan that you must buy depends on the life insurance budget and your personal goals. The life insurance options are aplenty and include wealth creation, wealth protection, pure term life cover, and even retirement.
Buying the Best Life Insurance Plan on a Budget
Contrary to popular perception, when you buy life insurance you do not have to invest large amounts upfront. The Unit Linked Insurance Plans (ULIPs) are designed such that you invest small amounts, to the tune of even Rs.2000 per month, over a long term and derive maximum benefits of multiple bull runs in the market. If you start investing in a plan such as Invest 4G, say, at the age of 25, a significant proportion can initially be allocated to equities to take advantage of aggressive growth opportunities. The Systematic Transfer Plan (STP) allows you to move your wealth to conservative debt instruments either periodically or towards the end of the policy period.
The Auto Fund Rebalancing (AFR) gets activated each quarter to reorganize your investment in the proportion defined by you. For example, if you have allocated 20% to Fund A, 30% to Fund B, 40% to Fund C and 10% to Fund D, the fund values will keep varying depending on the individual fund’s growth. The AFR helps to put the allocation in original order.
|Total Amount Invested||10,000|
|Fund||Your Defined Allocation||Initial Fund Value||Fund Value (At End of Q1)||New Proportion||Fund Value after AFR|
Best Budget Life Insurance -Term Life Insurance Plan
The iSelect Smart360 Term Plan, offered by Canara HSBC Oriental Bank of Commerce Life Insurance Company, is one of the most affordable term insurance covers. Online term plans can not only financially safeguard you and your spouse but also empower you to leave an inheritance behind.
iSelect Star term life insurance policy gives you the flexibility to include even your spouse as a joint applicant, thus saving you the hassle and money of buying two individual policies. The return of premium option is a star feature because all your premiums are returned at the end of the policy term. In case of unfortunate demise, your nominee would get the Sum Assured in the form of fixed lumpsum pay out.
No one can predict death and therefore life insurance is a good hedge because the Sum Assured is paid irrespective of the year of death-be it the 2nd year or 10th year after signing up for the policy. Even if the person dies towards the end of the policy term, the investment is worthwhile because there is no other similar option where you pay premiums of ~Rs. 12,000 each year from the age of 30 and leave behind a legacy of Rs.1Crore at the end of the 40-year term. Fixed deposits with similar recurring investment options can give a return (at current rates of interest) of Rs.15lakhs at the end of a similar term.
The premium of iSelect Star term policy is affordable for three reasons.
i. Increase Sum Assured with Age
When you sign up at 30, you can opt for a lower Sum Assured, pay lower premiums and up your ante as per your life stages. This feature gives you the best of both worlds. A Rs 1 Cr policy costs you a premium of Rs. 12,000 per annum, if you start at 30, whereas the same policy may cost you a premium of Rs. 30,000 per annum if you start at 40 besides the risk of remaining uninsured for 10 years. With iSelect Smart360 Term Plan, you sign up at 30 but pay an even lower amount for the first few years. However, your maximum premium (of Rs. 12,000) remains unchanged
ii. Monthly Mode
You can choose the frequency of payment. A monthly premium payment option can seem lighter on your pocket because you pay each month as soon as you get your monthly paycheque rather than piling it up for once a year.
iii. Designed to be Affordable
Canara HSBC Oriental Bank of Commerce Life Insurance Company’s objective is to make their insurance plans affordable for all. Ergo, the premiums are inherently at their best.
How to Reduce Your Life Insurance Premium Cost?
a) Buy at a Young Age
If you start your term life plan as soon as you start earning, your premium will be at its lowest. With age and any ailment, premiums spike rapidly.
b) Include Only the Important Features and Benefits
There are several riders and additional benefits offered along with insurance policies to make them more wholesome and comprehensive. However, you must decide which features you need and leave the rest.
c) Keep a Shorter Policy Tenure
Do you really need a life cover until the age of 99? The average lifespan of Indians is approximately 70 years. Some live longer than 70 and some pass away much earlier. Take an objective view depending on your circumstances, affordability, other investments, and number of dependents.
d) Choose a Longer Premium Payment Tenure
When you pay for a limited term and opt for a longer duration plan, you may be stressed to pay higher premiums in a short term. Opting for a longer premium payment tenure may even out the load and still give you equally good or better returns on investment.
Life insurance is an essential part of a modern investment portfolio and is widely used as an investment tool besides providing core financial protection against death. If you want to know how to buy life insurance, please contact your insurance advisor, walk-in to the nearest branch or logon to the website. Insurance is NOT expensive. Not buying an insurance policy could prove expensive.