Protection or Term plans have a high risk protection component. The main objective of these plans is to protect your family financially from unforeseen circumstances.
Protection plans protect the family against the ‘cash flow risk' of the untimely death of the breadwinner. This is a real risk most of us undergo. Everything does not go as planned. Life throws up nasty surprises. The only way to somewhat reduce the pain of death in the family is to make sure that at least financially the family is secure.
We all want to ensure the financial future of our family, even in our absence. Protection plans help you do exactly this.
Let's look at an example:
Gaurav is a healthy 25 year old management professional with an income of Rs. 5,00,000 p.a. Assuming his income increases at a rate of 10% p.a., while the rate of inflation is around 4%;
At 60 years of age, Gaurav's real income would have been around Rs. 38,43,043 p.a. If Gaurav were to live till 60 years his Human Life Value would have been Rs. 85,00,000 at discounted rate of 6% annually.
However, with a Protection or Term Plan, a mere sum of Rs. 10,251 annually (exclusive of service tax & educational cess) can help Gaurav provide a financial cushion of up to Rs. 85,00,000 for his family over a period of 25 years.