Nikhil Walavalkar Moneycontrol News
Catch a personal finance expert any time of the year and ask him which is the best time to purchase term life insurance policy and pat comes the reply – NOW. The idea is to buy the adequate amount of life insurance as early as possible. However, not many get the time to buy life insurance policy that serves their needs. In some cases, they find it difficult to understand the terms and conditions. Some get into the lanes and by-lanes of investment products offered by life insurers. But, April could make the life easier for most.
“While every month is a good month, beginning of the financial year is a good time to reassess your financial plans. April is also the month when most salaried employees receive their annual bonus. If they already have term insurance then they should reassess the adequacy of the sum assured,” says Sandeep Batra, Executive Director, ICICI Prudential Life Insurance.
Why April?
Traditionally, Indians buy life insurance towards the end of the financial year. More than half of the business of life insurers comes in the last three months of the financial year — especially in March. It is the tax benefit attached to the life insurance products, which makes most of these purchases go through — sometimes even at the cost of overlooking the protection needs of the buyer.
However, April is a different time. The peak work load is behind for most life insurance agents and the sales staff of insurers. This is the lean period. There is a high chance that they will spend more time answering your queries at length, as the business is low in this month. “At the beginning of the year you, too, have the time and liquidity on your hand which will allow you to compare and buy the best available option,” says Deepak Yohannan, founder and CEO of myinsuranceclub.in.
Saroj Satpathy, executive director, Salasar Insurance Broking Services says, “Some employees do get bonus at this time of the year. This leaves some extra money in hand which can be used to make an informed insurance buying decision.”
How to buy the right product?
Term life insurance has been in vogue for years. Thanks to rising financial literacy, the product is being sought by young buyers. Do check the options available online. Sandeep Batra says, “An individual should buy a life insurance policy with adequate cover keeping in mind their future financial goals & existing liabilities. For the family to maintain the current level of expenses the rule of thumb is 10 times annual income. However, there would also be inflation and the need for meeting large onetime expense (e.g. child’s education or marriage).” If you have a large loan, say a home loan do not forget to buy extra sum assured. In case of an eventuality the family gets the required amount of money after paying off the loan using the sum assured. If you want to arrive at a number using a scientific tool, you can also use human life value calculator.
“Buy a life cover till your age of retirement, though there are many products available that offer to cover you till the age of 100,”says Deepak Yohannan. Once you retire there is not much financial interest left. Many individuals wonder if they should be buying additional covers such as accident and critical illness along with term life insurance.
“Critical illness cover should be bought as an additional benefit with term life insurance as the premium remain constant throughout the policy period,” points out Deepak Yohannan. Accident benefit rider can also be bought. If you want a comprehensive accident cover, go for personal accident insurance policies issued by non-life insurance companies.
“April is good time to review your insurance portfolio along with your investments. Even if you have bought a term life insurance cover, do check the coverage and other aspects. You may choose to enhance the cover, if the need be,” says Satpathy.
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