Why Buy Term Insurance Even at Rising Rates?

• 11th Oct 2021
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Among all the life insurance plans available in the market, term insurance is the most popular one. It’s a pure protection plan and is considered one of the most uncomplicated insurance plans.

In term insurance, you pay the premiums to keep the policy in effect. If something happens to you during the policy term resulting in your death, the insurance company will pay the death benefit to your family in a lump sum.

In the current COVID-19 scenario, term insurance premiums have risen to some effect, and the reason for that is the increased mortality rate. Additionally, due to COVID-19 risk, more people are buying life insurance to secure their family’s financial future even in their absence. This has resulted in some insurance companies increasing term plan premiums by up to three times in the past year.
But should you avoid buying a term insurance policy because of the increased premium? Absolutely not! Term plans offer guaranteed protection to your loved ones, and you shouldn’t let rising insurance rates deter you from buying it. Let us look at the reasons for the increase in term plan costs and what you can do.

Increasing Mortality Rate

According to recent data released by the Ministry of Health, the COVID-19-related mortality rate has been much higher than predicted. Insurance premium rates are calculated by estimating the mortality rate and future claims. This year, the actual mortalities far exceeded the calculated mortalities owing to the pandemic.

This increase has been reflected in the number of insurance claims that have risen higher than expected. This resulted in re-insurers increasing insurance premiums for insurers, who in turn increased their insurance rates for consumers.

Term Insurance Demand

The demand for term insurance has also seen a tremendous rise owing to the fear of death due to COVID-19. The government clarified that insurance claims for death due to COVID-19 are valid, and hence more and more people are buying term insurance to protect their families. This upward rise in insurance purchases has been seen despite the rising cost of insurance.

What Should You Do?

The term insurance rates in India have increased by up to three times in the past year. Sufficient life cover is a must-have in today’s age for an earning member with dependents.

Think about your family’s conditions and how will they meet their daily expenses in your absence. They may face financial hardship due to sudden loss of income.

The death benefits from a term plan will ensure that you have sufficient funds at hand to meet their expenses for a few years and be financially independent. The price increase should not deter you from buying a policy for your family. Keep in mind that the premiums will remain constant throughout the tenure, and once you sign on the dotted line, you can have the peace of mind you get knowing that your family’s future is secured.
So, put all hesitations to rest and look for the best term plan available. At present, you still have time to protect your family’s future, so it is best to act now instead of regretting later.

- A Consumer Education Initiative series by Kotak Life