Every earning person knows the importance of insurance. However, with lots of policies on offer, one might get confused. Especially, it is hard to understand the right age to take it. Let’s examine expert opinions on this.
Insurance is like leaving his life risk to insurance companies. This provides security to the family members as well as one’s future. Accidents are always unpredictable. Getting unscathed from these depends entirely on the situations. In case there is a risk for life, not having a life insurance will shatter the lives of family members. Who will repay the debts made for family and other expenditures? Therefore, life insurance is a must for all and there are terms as well as life long types in these.
This is a type of insurance that provides insurance for a fixed time period. This generally has more insurance money with lesser premium. Apart from these, there are polices that yield earnings after maturity while providing insurance throughout the police time. These have higher premium with lesser insurance. These are also called whole life policies or permanent policies.
Whole life policy
These have higher premiums. Experts say that these types are best for people more than 40 years. Since these people have added responsibility of children, these policies provide financial security (savings) and best for such needs
For people less than 25 years, it is better to take normal policy and take whole life policy after maturity of the first one because starting with whole life policy at this age demands higher premiums. There are sub types in term policies such as apart from life insurance, house, insurance to loans, and bus and train travel.
Aegon religare is offering life term policy. Generally, these types are limited for years 30 to 35. Policy will be in existence only if the premium is paid without fail. The policy gets closed after the time period. But whole life policies offer life insurance for 100 years with premium for very less time. For example, if a30-year-old takes whole life policy, the premiums get ended at 60 years but the policy will stay in vogue for the whole life.
In Aegon religare life term plan, if a 30-year-old takes a 30 year policy, he needs to pay it till 60 years of age and after that, the police changes to whole life term policy. While the insurance is paid to the nominee in case of death of policy holder during this 30-year-old period, the same stands true even after 60 years of age till 100 years and is closed after that meaning the policy gets closed with the death of the holder.
Since it is natural to die before 100 years, people who want to give something to their kin after their death and who want to leave something after death take this policy.
Since death is common for all and need to pay after death at any age, lifetime policies have higher premiums. For example, if a 30 -year-old takes a term policy of 1 crore value in Aegon religare, premium will be 7500 but for a whole life term plan, this stands at 40000 and this is a huge difference.
So, it is a waste to take whole life policies with such high premiums but one can examine if there is a difference of not more than 10% between whole life and general term policies. It is better to take general term policy with 7500 premium and at 60 years can invest in funds with lesser risks. In the above example while whole life policy demands 40000 per year as premium, general term policy can be done with just 7500.
So, with a general term policy and investing 3000 per month in mutual funds for 30 years yields 1 crore 5 lakhs with an average 12% interest. So, it is better to take whole life policies if the difference is not more than 10% when compared with general term policies and if the premium is higher, always better to take general term policy and invest the remaining in mutual funds.
Time span of insurance
First think the basic need for insurance. Experts always say insurance is necessary only if one has dependents. If there are no dependents and there are no financial responsibilities, there will be none to avail the insurance benefits in case of death. Experts suggest that insurance should be taken for the time period of one’s earning age and as long as one has people depending on him for their financial needs. In some, this can be only 50 years, some 60 years and some 70 years. The maturity age should be decided based on their needs and capacities. Maturity at 60 years is not correct for each and everyone. Some people tend to achieve a lot at a very young age and do not need much in the way of insurance. The maximum time period is 30 to 35 years for some insurance policies. For example, if a 25-year-old takes a policy, with a 35-year policy he will have coverage only till 60 years but there is no guarantee that all his responsibilities will end by that time. So, it is always prudent to take a policy that has no time limit.