Why do we need Term Insurance?

We live in uncertain times. Given the pulls and pressures that we face in our daily lives, one never knows when the situation will take an unexpected turn. The commitments only go up when we have family members who depend on us. While sudden death - in accident or illness - can never be anticipated, one can definitely prepare for such unexpected events in life by buying a term life insurance cover.
A term life insurance cover is a small cost that we pay now to secure the future of our loved ones. When we leave behind a life insurance policy, it can take care of a number of costs such as education of children, EMIs and wedding expenses. The life insurance corpus can also be converted into a monthly income so that day-to-day expenses are taken care of.
A sudden death is traumatising but any debt that you leave behind will only add to that tremendous burden. But if you have invested in a term life insurance policy, that money can be used to pay off the debt and give much needed financial security to the family members.
However, most of us face a fundamental problem when we buy term life insurance. We still see insurance as an investment product and not as a protection cover for our family. When buying insurance, we are more interested in the "returns" and often ignore the larger picture of ensuring adequate coverage for the family when we are no more.
Unfortunately, insurance has mostly been sold like just another investment product in the country whereas that is not the main objective of this segment.
A term plan is the best form of insurance because it gives a very high cover at a low price. Assuming that you are 35 and buy a 30-year-term insurance cover of Rs 1 crore, your annual premium will work out to Rs 12,800 or just Rs 36 per day! Of course, the premium of a term plan is a fraction of what people pay when they buy an endowment plan, a money-back policy or ULIP with the same coverage.
This is possible because there is no investment component in a term plan as the entire premium goes towards covering the risk. But it's still a small cost considering the peace of mind that it brings with it.
There can be no bigger regret than not leaving adequate resources for your family when you could have easily done so.
There are a few things you must keep in mind when buying a term insurance. Is the cover that you are buying now will be sufficient to keep your family's expenses? It is thus important that you must work out the life cover, keeping all costs in mind before you purchase term insurance. Second, the tenure of the policy is as important as the amount you buy. Don't buy a life cover that ends when you are in your 40s and 50s. Go for a term plan that is customised as per your needs and lasts for a sufficient period of time. For example, if you are buying a term plan at 35, buy one that lasts for at least 35 years so that even if you are gone, the money will ensure that your kids are educated and working by the time it expires. Third, look for a plan that is indexed to inflation because a cover of Rs 50 lakh today will be way lower in its actual worth 15-20 years down the line. So make sure the sum insured under your term plan automatically increases every year in line with inflation.

If you haven't bought your term insurance plan yet, do buy it soon to ensure financial security of your loved ones and your own peace of mind.

Things to keep in mind

• Is the insurance cover that you are buying now will be sufficient to keep your family's expenses?
• It is important that you must work out the life cover, keeping all costs in mind before you purchase term insurance
• The tenure of the policy is as important as the amount of insurance cover
• Don't buy a life cover that ends when you are in your 40s and 50s. Go for a term plan that is customised as per your needs and lasts for a sufficient period of time
• Look for a plan that is indexed to inflation because a cover of Rs 50 lakh today will be way lower in its actual worth 15-20 years down the line
• Make sure the sum insured under your term plan automatically increases every year in line with inflation

MYTH & TRUTH about Mutual Funds

MYTH

1. Mutual Funds are for the experts only.
2. A Mutual Fund is an equity product.
3. Mutual Fund with Rs.10/- NAV is better than a Mutual Fund scheme having a Rs.50/- NAV.
4. Mutual Fund Investing require DEMAT A/c.

TRUTH
1. Mutual Fund investing not require expertise because you don't have to take the call on when to buy or sell shares. The fund manager will do it for you. It is his job to track various sectors and companies, and decide where to put the money you and other investors have given him.
2. When people think of funds, they think of only Equity Funds, but the truth is that a Mutual Fund is a vehicle that can carry any passenger.Equity Mutual Funds will buy shares off the stock markets and Debt Mutual Funds will buy into debt product like government bond, corporate debentures and treasury bills. The risk of each kind of fund will depend on the passenger carried by the bus.
3. Investing in funds Rs.10/- NAV or Rs.50/- NAV nothing matter on funds performance. The fact is that it is the percentage return on invested funds that matters, remains unnoticed and overlooked. For example, given a similar performance level of 10% appreciation , a Rs.10/- NAV will rise to Rs.11/- whereas a Rs.50/- NAV will rise to Rs.55/-. It's a simple truth that is neither told nor heard. In fact due to already demonstrated peformance , the chance of the Rs.50/- scheme posting the 10% appreciation is far higher than the one which has just started its innings.
4. Mutual Funds can be bought either online, either directly through AMC or through a broker; however, one can also invest offline by filling a physical form.