Secure Your Family's Future with Term Insurance

Term insurance is a pure form of insurance that provides a death benefit to the nominee and can be bought for a specific term or tenure.

Indians have very low regard for life insurance and term insurance in general. Perhaps this is the reason why life insurance coverage in India is just 25%. 988 million Indians which accounts for 75% of the population are living dangerously without life insurance in the country. The majority of the population doesn’t even know what is term insurance or about term insurance benefits.

To make matters worse, the life insurance industry is plagued with the problem of low insurance coverage ratio. This means that even the 25% who have life insurance coverage are not adequately covered. One of the reasons for low coverage is that Indians have relied more on endowment policies and ULIPs where life insurance coverage may not be adequate.

However, over the years term life insurance has been playing an important role in improving the insurance coverage ratio in India. Therefore, citizens need to learn about term insurance benefits and get adequate coverage to sustain their dependents in their absence. According to experts, in today’s day and age, one must have a minimum of 1 crore term insurance coverage to shield the family against inflation and rising costs of living.

During 2020-21 many families were devastated by losing the head of the family or bread-earning person to COVID. Family members had to face dire situations as their future was not secured in advance by the head of the family by not taking term, health or life insurance.

What we still see is most of the Indians don't think about future uncertainties and don't purchase any insurance policy. Because of this attitude, his/her immediate family members will bear the brunt of the increase in educational and health expenses. Also, savings that they accumulated will evaporate in a couple of years.

How to calculate the life insurance coverage ratio

You can easily find out whether your family is adequately covered in your absence by calculating the life insurance coverage ratio. It can be calculated with the following formula:

Life Insurance Coverage Ratio = Net worth + Death benefits / Annual salary or Annual income

In simple words, the life insurance coverage ratio determines how long or for how many years the death benefit and your investments will sustain your family. For example; Karthik’s net worth is 50 lakhs and it includes his investments in mutual funds, EPF, PPF and stocks. He also has an endowment plan that will pay his family Rs. 25 lakh as a death benefit and his annual salary is Rs. 10 lakhs.

Current - Karthik’s life insurance coverage ratio = 50 + 25 / 10 = 7.5

This means that with the current life insurance coverage and his investments, Karthik’s family will only be able to survive without him for 7.5 years. And this calculation does not even take into account the impact of inflation.

Karthik’s low life insurance coverage ratio can be easily improved with 2 crore term insurance such as the SBI Life – Smart Shield Premier that can be bought as low as Rs. 800 per month (excluding taxes).

Future - Karthik’s life insurance coverage ratio = 50 + 200 / 10 = 25

By availing 2 crore term policy, Karthik's family now will be able to survive for the next 25 years without any worry.

With patience and perseverance, a person can secure his family by purchasing term insurance.

Stop procrastinating and start securing your and your family's future with term insurance by contacting industry experts.

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