The home loan cover, or the term assurance policy, allows insurance-seekers to take insurance at a very low premium to cover the outstanding liability on a home loan. Now let us see how the splitting of policy shall help the client to reduce the premium component significantly.
The term assurance policy is a pure life cover policy for the individual and there is no saving element. The premium is calculated based on his age and tenure. In this policy if the individual were to survive the term plan tenure, he will receive nothing, not even the premium that he has paid. Even though there are few term assurance policy which pays you back the premium, it is not a smart thing to do, since the premium for such policy shall be high.
Term assurance plans are particularly advisable to those who have taken home loans and wish to cover it against any eventuality.
Home loans are a 5-30 year liability. Should anything happen to the breadwinner during this period; his dependents could potentially become homeless after his demise. Hence, It makes sense for the breadwinner to provide for such an eventuality by covering this risk.
Since the plain vanilla term assurance plan do not provide for return of premium, the insurance-seeker must try to minimise his premium outflow to the best possible extent. One way to do this is to split the policy.
This is illustrated below well in the attachment.
 Attachments
Split insurance policy - illustration (90334-13713-Split Insurance Policy.doc)
|
| Author: Nilesh Panchal 15 Oct 2009 | Member Level: Platinum Points : 2 |
Hi Anand,
The scenario and concept is very interesting. However there are some policies available now like Birla Sun Life HNWI Plan in which policy holder can avail high Sum Assured with lesser premium.
If you would have provided the illustrations with name of Plan it would be better to understand and to compare among the Policies.
A Nice Article. Thanks for sharing.
|