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Why Buy Term Insurance Even at Rising Rates?

Despite volatile markets, term plans are always the right choice. It not only safeguards your family’s financial future but also beats inflation in the long run.

  • 2,901 Views | Updated on: May 30, 2024

Since COVID-19 hit the world, people have been more inclined towards buying term insurance. During the pandemic, people realized that purchasing life insurance can help them secure their family’s financial future in their absence. Due to the increase in the purchase of these plans, the market increased term plan premiums in the past year. Given the present market conditions, is it beneficial to buy term insurance at these rising rates?

Key Takeaways

  • Term insurance is still beneficial at rising rates, as it can help your loved ones achieve their long-term financial goals.
  • Rising term insurance premiums are partly due to the increased mortality rate and demand caused by the COVID-19 pandemic.
  • You should consider your family’s financial needs and circumstances when deciding whether or not to buy term insurance at rising rates.
  • Despite the rising cost, term insurance is still a must-have for earning members with dependents.

Term insurance is the most popular among all the life insurance plans available in the market. It is a pure protection plan and one of the most uncomplicated insurance plans. You pay the premiums in term insurance 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.

But along with these term insurance benefits, you should always keep an eye on the cost of premiums and market inflation affecting these costs.

This blog will explore the impact of inflation on rising insurance premiums. It will help you decide whether it is advantageous to buy term insurance with the rising cost of premiums.

Inflation and Its Impact on Term Insurance Premiums

Inflation is the gradual increase in the prices of goods and services over time. In other words, as the years roll by, the money you have today will buy you less than it did in the past. It is like a silent thief that steals the purchasing power of your hard-earned money.

You might wonder why you should consider buying term insurance when the rates rise. But here is the thing: rising rates are not the only thing to worry about. Inflation can sneakily erode the value of your insurance coverage over time, which you definitely need to consider. If you have a term insurance policy with a fixed death benefit, the value of that benefit will decrease over time if inflation rises. This means that your family may not receive enough money to meet their financial needs if you pass away in the future. You are wrong if you think not buying insurance due to higher premium rates can save you money.

Rising rates means higher cost of hospitalization, medicines, etc.; therefore, you need to be prepared well for any emergency. Insurance plans offer financial support during such times. So do not overthink your decision to buy an insurance plan.

Reason to Buy Term Insurance Even at an Increased Rate

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 should not 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.

Increased Mortality Rate

Insurance premium rates are calculated by estimating the mortality rate and future claims. Pure protection premiums have risen by 50% to 100% at industry level, from the pre-Covid-19 lows.

This increase has been reflected in the number of insurance claims that have risen higher than expected. Re-insurers raised insurance premiums for insurers, raising their insurance costs for customers.

Provision for Long-Term Financial Goals

Term insurance is not just about providing for your family immediately after your passing. It can also play a crucial role in helping your loved ones achieve their long-term financial goals, like funding your children’s education. However, if you do not consider inflation, the payout from your policy may not be sufficient to meet these goals down the line.

Protection Against Inflation

Rising rates often reflect inflation and increased living costs. By purchasing term insurance now, you protect your loved ones from the impact of inflation, ensuring that the death benefit retains its value over time.

What Should You Do?

Term insurance rates in India have increased significantly in recent years, but this should not deter you from buying a policy. Term insurance is a must-have for any earning member with dependents, as it provides financial security to your loved ones in the event of your untimely demise.

Consider your family’s financial situation and how they would meet their daily expenses without your income. A term insurance policy can provide a death benefit that can help your family maintain their lifestyle and meet their financial needs for several years.

Don’t let the rising premiums discourage you from buying a term insurance policy. The premiums will remain constant throughout the policy term, so you can have peace of mind knowing that your family’s future is secure.

Here are some additional tips for choosing a term insurance plan:

  • Compare plans from different insurers to get the best coverage and premium.
  • Choose a plan with a coverage amount that is sufficient to meet your family’s financial needs.
  • Consider adding riders to your policy to provide additional protection, such as a critical illness rider or a waiver of premium rider.
  • Read the policy document carefully before you purchase it to understand the coverage, exclusions, and terms and conditions.

Conclusion

Despite these rising rates, it remains imperative to buy term insurance. The benefits of term insurance, such as providing guaranteed protection to your loved ones and ensuring their financial security in your absence, far outweigh the increase in premiums.

Moreover, considering the impact of inflation on the value of your insurance coverage over time, purchasing term insurance now becomes even more crucial to safeguard your family’s long-term financial goals. So, put all hesitations to rest and look for the best term plan. 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

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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