When Aegon Religare Life Insurance began operations in India in 2008, its marketing campaign focused on the problem of underinsurance in India. In the past seven years, pure protection term plans have become more popular but a large number of Indians are still afflicted by KILB (Kum Insurance Lene ki Bimaari). A recent study by global reinsurer Swiss Re estimates that for every $100 (approximately Rs 6,500) needed for protection, the average Indian household spends only $7.8 (Rs 507), leaving a Massive protection Gap.This gap is largely because Indians prefer to invest in endowment insurance plans or Ulips instead of buying pure protection term plans that have no maturity value. Only 14% of the 4,488 respondents to a recent survey by Ficci and Canara HSBC OBC Life Insurance had bought term insurance. An overwhelming majority (64%) had taken traditional plans and 19% had invested in Ulips.
This gap is largely because Indians prefer to invest in endowment insurance plans or Ulips instead of buying pure protection term plans that have no maturity value. Only 14% of the 4,488 respondents to a recent survey by Ficci and Canara HSBC OBC Life Insurance had bought term insurance. An overwhelming majority (64%) had taken traditional plans and 19% had invested in Ulips.
If you have bought an insurance-cum-investment plan, chances are that the protection element is not big enough to meet this basic objective of buying life insurance. Traditional plans fall between the two stools of good returns and adequate life cover—they offer poor returns and very low life cover.
Meet Vivek Kumar, a telecom professional who pays almost Rs 1 lakh a year for three traditional plans that combinedly cover him for Rs 10 lakh. That's quite inadequate for a person who earns Rs 6.4 lakh a year, is the primary breadwinner of the household and plans to start a family next year.
Vivek Kumar, 28 yrs, Kolkatta
Dependents: Wife (26) and elderly mother
Annual income: Rs 6.24 lakh
Monthly expenses: Rs 32,000
Outstanding loans: Nil
Recommended insurance cover: Rs 80 lakh
Existing life cover: Rs 10 lakh
Additional cover required: Rs 70 lakh
Cost of additional insurance : Rs 650 per month
Important tip: Though the required insurance is low right now, it will go up when the couple start a family sometime next year.
How much cover you need
An adequate life cover ensures that the family goals are not hampered due to the breadwinner's death. "Insurance should be taken to ensure goals are met on the target date, and the family does not have to bear financial loss, in addition to emotional loss, in the case of resources planned for a particular goal being insufficient to meet the goal expenses," says financial planner Dilshad Billimoria.
So, an individual must have an insurance cover that can help replace his income if something untoward happens to him. The life insurance cover should be big enough to generate income that can take care of the expenses of the family till his dependents are self-sufficient.
thepolicykart.com help you compute the ideal life cover taking into account your income, dependents and liabilities. However, you need to go beyond thepolicykart calculators to ascertain the right sum assured. One broad approximation is about 6-7 times the annual income of the individual.
But this does not always reflect a person's insurance need. If he earns Rs 12 lakh a year (Rs 1 lakh per month) but has taken a home loan of Rs 50 lakh, he needs more cover than the Rs 72-84 lakh suggested by this approach. Gurgaon-based Abhimanyu Yadav has an outstanding home loan of Rs 51 lakh. His life insurance cover must be big enough to settle this debt. On the other hand, if an individual also has other assets and investments, his insurance needs would be far lower.
"A simple rule of thumb would be 15 times gross annual income for those below 40 and 10 times for those above 40. To play safe they can add approximate current value of all goals to this figure," says financial planner Suresh Sadagopan.
Other more sophisticated means of arriving at the ideal figure include human life value (HLV), need analysis and income replacement methods, amongst which the former is the most commonly used one
Abhimanyu Yadav, 36 years, Gurgaon
Dependents: Wife (33) and Daughter (6)
Annual income: Rs 10 lakh
Monthly expenses: Rs 24,000
Outstanding loans: Rs 51 lakh
Recommended insurance cover: Rs 1.5 crore
Existing life cover: Rs 5 lakh
Additional cover required: Rs 1.45 crore
Cost of additional Insurance : Rs 1,350 per month
Important tip: At Pathak's age, the premium will not be too high. If he delays the decision by 3-4 years, the premium will shoot up after he crosses 40.
So,the Result Is Insurance Cover is much more needed compare to endowments.Because these traditional plans are not so enough to secure your family.So,proceed with Endowment plans,but look for term plans or other oinsurance cover plans also.
This gap is largely because Indians prefer to invest in endowment insurance plans or Ulips instead of buying pure protection term plans that have no maturity value. Only 14% of the 4,488 respondents to a recent survey by Ficci and Canara HSBC OBC Life Insurance had bought term insurance. An overwhelming majority (64%) had taken traditional plans and 19% had invested in Ulips.
If you have bought an insurance-cum-investment plan, chances are that the protection element is not big enough to meet this basic objective of buying life insurance. Traditional plans fall between the two stools of good returns and adequate life cover—they offer poor returns and very low life cover.
Meet Vivek Kumar, a telecom professional who pays almost Rs 1 lakh a year for three traditional plans that combinedly cover him for Rs 10 lakh. That's quite inadequate for a person who earns Rs 6.4 lakh a year, is the primary breadwinner of the household and plans to start a family next year.
Vivek Kumar, 28 yrs, Kolkatta
Dependents: Wife (26) and elderly mother
Annual income: Rs 6.24 lakh
Monthly expenses: Rs 32,000
Outstanding loans: Nil
Recommended insurance cover: Rs 80 lakh
Existing life cover: Rs 10 lakh
Additional cover required: Rs 70 lakh
Cost of additional insurance : Rs 650 per month
Important tip: Though the required insurance is low right now, it will go up when the couple start a family sometime next year.
How much cover you need
An adequate life cover ensures that the family goals are not hampered due to the breadwinner's death. "Insurance should be taken to ensure goals are met on the target date, and the family does not have to bear financial loss, in addition to emotional loss, in the case of resources planned for a particular goal being insufficient to meet the goal expenses," says financial planner Dilshad Billimoria.
So, an individual must have an insurance cover that can help replace his income if something untoward happens to him. The life insurance cover should be big enough to generate income that can take care of the expenses of the family till his dependents are self-sufficient.
thepolicykart.com help you compute the ideal life cover taking into account your income, dependents and liabilities. However, you need to go beyond thepolicykart calculators to ascertain the right sum assured. One broad approximation is about 6-7 times the annual income of the individual.
But this does not always reflect a person's insurance need. If he earns Rs 12 lakh a year (Rs 1 lakh per month) but has taken a home loan of Rs 50 lakh, he needs more cover than the Rs 72-84 lakh suggested by this approach. Gurgaon-based Abhimanyu Yadav has an outstanding home loan of Rs 51 lakh. His life insurance cover must be big enough to settle this debt. On the other hand, if an individual also has other assets and investments, his insurance needs would be far lower.
"A simple rule of thumb would be 15 times gross annual income for those below 40 and 10 times for those above 40. To play safe they can add approximate current value of all goals to this figure," says financial planner Suresh Sadagopan.
Other more sophisticated means of arriving at the ideal figure include human life value (HLV), need analysis and income replacement methods, amongst which the former is the most commonly used one
Abhimanyu Yadav, 36 years, Gurgaon
Dependents: Wife (33) and Daughter (6)
Annual income: Rs 10 lakh
Monthly expenses: Rs 24,000
Outstanding loans: Rs 51 lakh
Recommended insurance cover: Rs 1.5 crore
Existing life cover: Rs 5 lakh
Additional cover required: Rs 1.45 crore
Cost of additional Insurance : Rs 1,350 per month
Important tip: At Pathak's age, the premium will not be too high. If he delays the decision by 3-4 years, the premium will shoot up after he crosses 40.
So,the Result Is Insurance Cover is much more needed compare to endowments.Because these traditional plans are not so enough to secure your family.So,proceed with Endowment plans,but look for term plans or other oinsurance cover plans also.
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