Which is better, a Term Life insurance of ₹2 Cr until the age of 85 or ₹3 Cr until 65, assuming they both cost the same?
Most people prefer the first option given the longer coverage period.
But that might not be a good financial decision. Here’s an explainer from @Ditto_Insurance on why this is the case.
A term insurance plan is most effective if your absence would leave your family in a difficult financial situation.
God forbid, if something unfortunate happens to you when you’re in your 40s or 50s, your children might be young & your spouse may be unable to bear the brunt of it all single-handedly.
This is the time when you want to be as financially secure as possible. The extra ₹1 Cr from a ₹3 Cr plan could make a world of a difference to your children who are yet to graduate from school or college, and for meeting household expenses.
But if you’re nearing 80, your children are all grown-up and independent, and you’ve probably built enough wealth to promise a decent lifestyle to you and your spouse. Would term insurance be as useful if you pass away then? Probably not.
And if you factor in inflation, by that time the ₹2 Cr cover might not even be enough. More importantly, premiums drastically shoot up after 80, given that the life expectancy of most Indians is around 70 years.
This is why it’s a good idea to opt for a term plan with a higher cover and a shorter duration in most cases.
Still, a term plan should always be personalized for each individual. To get tailored advice for your needs, you can talk to @Ditto_Insurance advisors here.
Why would I take a term policy which expires at the age 65. When I am taking the policy I do not think I will die by 65. What happens with some Godsluck I survive and not die at 40 and die at 68. The policy lapses right. What is the use of the additional 1 crore.
Getting a policy which covers until 85 has a better chance of me utilising the policy amount than it going expired i.e the possibility of me dieing before 85 is a good possibility.
In any case, getting a 2 cr at the age of 40, is bloody good money for the kids and husband to live on. 2 crore is a lot of money and the way ditto has written, it seems 2 crore is few lacks and the additional 1 crore will make or break.
This baffles me. I would and expect my husband and kids to be quite happy that I lived upto 80. If I lived, the kids will continue to live their life like before as there is no change as I will continue to feed and provide them.
I dont think kids would want the Insurance amount and hence I die at the age of 40 and they pocket 3 crore. Not sure of husband though…
I take every year comprehensive motor policy…just because I took the policy I do not wish to meet with an accident and claim. I will be very thankful that one year passed without an accident. Maybe I am not getting the point right…
Ditto claims to be an advisor, but at the end of the day its just another insurance agent who makes money from policy sales. So its obvious that they will suggest the product which earns them more commission