When should you buy a term insurance plan?

In this week’s episode, Vivek Law talks about what is a term insurance cover and when you should buy one with Santosh Aggarwal, Chief Business Officer, Life Insurance, Policybazaar.com. 

TERM INSURANCE IS A MEANS OF PROTECTION 
 
Term insurance is a cover that would provide income and support to the policyholder’s family upon the demise of the insured during the policy term. Term insurance covers have a very low premium and a definite amount or sum assured. It is not an investment plan. It doesn’t make sense to calculate the rate of return for a term plan because one doesn’t know when they will die. 

SWITCH TERM INSURANCE PLANS AT A YOUNGER AGE 

A policyholder should switch from one insurer to another within five years from the inception of the policy and not more than this duration. This is because, the older you are, the more expensive will be your term insurance cover. 

There are a lot of companies in the market that offer term insurance cover at various prices. The cheapest to the highest price could be roughly about two times. Suppose you buy a term plan at 30 years of age and then shop for another term plan at 45 years of age whose premium is lower, still the term insurance cover will be more expensive for you because of your age. If you were to shop in the next 4-5 years from the date of buying the term cover, then you would get a cheaper cover because of a younger age.

((calculator)) 

PREMIUMS GET LOCKED IN FROM THE INCEPTION OF THE POLICY

In term insurance plans, the premium gets locked in from the inception of the policy, unlike health insurance where every year the premium is reset. Therefore, it is important to buy a term insurance cover at a young age because your premium will be less and won’t change at any age.