It is a tendency among Indians to go for maximum tenures when it comes to their term insurance plans. People want to buy term plans that will provide coverage well into their 80s! This is sheer lack of financial planning.
What we need to realize is that term plans are simply compensating a basic requirement for your family in your absence – your monthly income. When you are actively earning (from age 25 to 60), your monthly income pays for your loans and liabilities and your children’s education and upbringing expenses. However, once you retire, these liabilities are no longer present and therefore there is no need to compensate for them either.
At most, you will be paying for your children’s education until you are 60 – 62 years old. Moreover, according to current trends, it is quite clear that you will not have to worry about your children’s marriage. With the concept of simple, fast weddings gaining popularity, families of the future will not be spending as much on marriages either. Additionally, it is safe to assume your housing loans and car loans would be paid off while you are actively earning too.
Then why buy a product that compensates for your income till you are 75 or 80 years old? Apart from the reasons stated above, the difference between premiums for term plans with a tenure till you are 60 and term plans with maximum tenure will be well over 20% and almost touching 30%. There is absolutely no need to pay this extra money.
Therefore, the OneInsure Research Team suggests you to only compensate for your income while you are earning and to not compensate for income when you are no longer earning and your liabilities are over. Otherwise, the premium of the term plan itself will become a liability post-retirement!
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