Term Insurance: A Husband-Wife Conversation

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Aritra and his wife Anannya are discussing their Financial Plans. Aritra is convinced about buying a term plan while Anannya is not sure how it will help. She sees it as an unnecessary expense, especially because there is no maturity benefit. Let us see how the discussion goes:

Aritra (bleak face): Anannya, I have learnt that a term plan is the broader in form and suitable for our financial protection. It offers a large cover for a small premium. I think it makes a lot of sense.

Anannya (Quizzical): What does that even mean? Say, if you invest Rs. 20,000 a year, how much money will we get back and when?

Aritra (mild): Let me clarify that a term plan is a pure protection plan, which means that I pay a premium for a fixed number of years, say from now until my retirement age, and get a life cover for that tenure. Suppose, if something happens to me, you will get the cover amount. Otherwise, once the term ends, we will not get anything.

Anannya(sardonically): Did you mean that we pay for 30 years, which means about three lakhs, and then not get anything back? Let us put the money in a fixed deposit or a recurring deposit at 8-9% return so that we can get back at least some money after 30 years!

Aritra (alluring): I understand how this looks to you. You must always think in long-term. Imagine that even if we get back the entire premium after 30 years what we will buy with just three lakhs, which will not even last for 3 to 4 months! On the other hand, a term plan will pay you the promised money in case of my demise, anytime during the entire policy term. This means that even if I die after paying a single premium of Rs. 10,000, you’ll get the assured entire sum of one Crore. Now how does that sound?

Anannya (deadpan): Why do you always talk like that? You are fit and healthy. Nothing will be wrong with you.

Aritra (pouting): Well, of course darling, I am healthy today but life is uncertain. What if something happens to me and I do not want to leave anything to chance. With a term plan, I can die peacefully as I have assurance that even if I am not here, you will have enough money to take care of yourself. Besides a term plan is not very expensive and once we avail the plan, the premium does not change for the entire term. Besides, never consider it as an expense, it provides us worth much more than a few thousand rupees a year. A suitable cover will help you meet all types of expenses – from household expenses and rentals to EMIs and school fees for our kids.

Anannya (smiling): I understand this now. I always knew you were smart.

Finally, Anannya understood that insurance is not an expense but a safety net. It is incomparable to any investment, as it needs a different measure.

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