Innovations and Complications in Term Insurance

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Few days back I got a call from a friend and she asked me that she wants to buy a Term Insurance of XYZ Co. as it would give her a life cover till 75 as against ABC Co. which insures her only till 65. I asked her why she insisted on getting insured till 75. She said, “What’s the harm in getting yourself insured for 10 more years, it’s always better to have more”. I went on to explain, “It’s good to have protection when needed.” But having something that’s not needed might make you compromise on the things that you need.

Now when it comes to life insurance, not everyone needs it. It’s always a struggle when you lose someone. But if you do not want your family’s emotional struggles to compound due to financial difficulties in case of your premature demise then it’s a must have.

Hence, Term Insurance is the best bet when you buy a life insurance. But even the most uncomplicated product could not escape the complex world of manufacturers. In the name of innovation and differentiation you get to see term insurance which gives you coverage till 75 or insurance with riders or with features like return of premium etc. These innovations and competitions have given birth to a lot of confusions and buying a term insurance has become a challenge today.


People get so lost in this world of complexities that they forget why they really need a term insurance. All of us are exposed to a risk of premature death and demise of a bread winner of a family at an early age may cause a serious dent on his/her family’s financial well-being. What’s important to understand here is that it’s more of a need for today than a need for future. Hence rejecting an insurance because it gives you a cover till 65 only is not justified. Remember by the time you would turn 65, you might not even have any financial responsibilities. So why pay more?


One of the selling innovations that manufacturers use today is the “Return of Premium Policy” which says the premium you pay would be returned on maturity i.e. if you attain the covered age. Amazing it is!!! Isn’t it? Remember the premium you pay for any insurance is an expense and once it’s gone it’s gone. Then why do we intend to retrieve it back and on top of it pay extra penny for the retrieval. The premium for Rs.1 crore term insurance of a company (name omitted) for a 30 year old guy costs you Rs.7647 and the premium under same conditions for a ROP policy which would give you 110% of the premiums paid, costs you Rs.46597/- . Wait, are you really willing to shell out almost Rs.38000 p.a. for something which you might not be even entitled to. As the premium would be returned only if you are alive. Even if you do a cost benefit analysis, you would be a loss maker. Remember you buy a term insurance because you have an unknown risk of a premature demise and not as an investment to receive premium paid on maturity.


Many companies offer policies which come with riders like Accidental Death Benefit, Premium of Waiver rider, critical illness rider which are claimed as free. But the reality is each and every rider comes with its own cost which are even available as separate policies which can be bought depending upon the need. With riders policies become costly and hence we compromise on the amount of insurance we take today. If we club all the riders in one policy then the base policy (term insurance) loses its relevance and we start evaluating it based on the factors which are not relevant.

Companies innovate because we love to experiment. But experimenting with something that concerns your family’s future is not worth it and may make their life miserable when you are not around. Stay simple – Stay uncomplicated and give your family the protection they need and deserve.