Overview

• Most of us would agree that there is nothing as valuable as one’s LIFE and well-being. It is difficult to put a price on it and hence no amount would compensate for it.
• Loss of Life of the Bread-Earner of a Family would have a tremendous effect on the family’s financial conditions, especially lower and upper MIDDLE-CLASS Families.
• Life Insurance safeguards you and your family from such loss and is an agreement between the insurance company and the person insured. It states in the event of the untimely death of the person insured, the company would compensate the family with whatever amount the insurance policy was for, say Rs 1 CRORE.
• The insurance company charges a yearly premium for this guarantee which is generally quite low when compared to the sum assured if taken at the right age and health.

1:- Types of Life Insurance

1.1:- Endowment

• The Word ‘Endowment’ means Gift. An Endowment insurance claims to gift you with both the ‘Death Benefit’ and the ‘Survival Benefit’.
• Suppose you take the insurance for 40 Years, say 25-65 years. In an Endowment Plan, the nominee will get the sum assured in case of your untimely death. If you do not die during this period of 40 years, you will receive some amount as a ‘Survival Benefit’.
• This may seem lucrative but has a lot of downsides. We will explain the best life insurance for seafarers as you read further.

1.2:- Whole Life Insurance

• Statistically speaking, ‘Whole-Life’ means ‘till the age of 99’
• If you die at 99, the nominee will receive the sum promised. 
• Problems with this plan are:
  • Higher Premiums
  • Inflation-adjusted sum assured will be much less in the long run.
  • If you die at the age of 100, you will not receive anything as sum assured.

1.3:- Money Back Policy

• The sum assured is paid back to you in specific intervals of time
• For Example, if you have a cover of Rs 1 Crore, 25 Lakhs may be paid to you after 10 years of the policy if you survive. The rest of the money left, i.e.,75 Laksh will be paid back to you in subsequent years.
• This may be considered an Investment Policy rather than an Insurance Policy

1.4:- Unit Linked Insurance Plan (ULIPs)

• In this type of Insurance plan, part of the money that you pay as a premium will be utilized for your Insurance and the remaining part will be invested in Mutual Funds, Stocks, etc.
• The problem with this type of insurance is that only a small portion of the premium paid is utilized for Insurance, which should be the ultimate aim to protect your family. 

1.5:- Term Insurance

• The Term Insurance Plan is unarguably the cheapest of all other plans.
• The Insurance is given for a specific period, say 25-65 years. In case of your untimely demise, the company will pay the entire sum assured to the nominee.
• Generally, depending on the age, and health of an individual, for a sum assured of Rs 1 Crore, you may have to pay a premium between Rs 10000- Rs 25000 per annum. This boils down to about RS 1000- RS 2000 per Month!

2:- Term Insurance v/s Life Insurance. Which is better for Seafarers?

Here are the reasons we believe that Term Insurance is the Best for Seafarers:

1. Affordable Premiums – If you take the insurance at a young age, the premium is usually very low. 
2. Constant Premium – The premium remains the same for the entire Term of the policy, say 40 years. If you take inflation into account, you will be practically paying a much lower premium for the same sum assured.
3.  True long-term insurance It is truly an insurance policy. Reading and understanding the terms and conditions will help you a lot. 
4.  Low Claim Rejection – Term Insurance policies generally have a low claim rejection if all related information is declared properly.
5.  Riders –  Life insurance policies provide the option of adding riders such as critical illness, disability, etc to the existing policy.

2.1:- Endowment vs Term Insurance

Let’s Understand this with an Example:

For the same sum assured, say Rs. 1 Crore, there are two plans; An endowment plan and a term insurance plan. The term insured is 25-65 Years of age.

Yearly Premium for Term Insurance = Rs.15,000 (Roughly)

Yearly Premium for Endowment = Rs.45,000 (Roughly)

Suppose you die at the age of 55. That gives you a 30-year Investment Period starting from the age of 25.

You save Rs. 30000 annually in premiums. If you invest this Rs.30000 in a safe SIP of that roughly gives you around 12% returns, You would have gained Rs. 88,24,784 in addition to the 1 Crore promised to you by the insurer. 

If you do not die till the age of 65, this would give a 40-year Investment period. The same 12% returns will give a Corpus of about Rs. 3 CRORE!

Use this calculator to Verify! 

Note: Disciplined Investment is key to making full use of the Term Insurance

2.2:- Term Insurance Price

Have a look at the premiums of various life insurance plans in India:

2.3:- How Much Term Insurance do I need?

Let’s divide this based on ranks in the Merchant Navy:

Sr. No.	Rank	Minimum Term Insurance Amount
1.	3rd Officer/3rd Engineer	Rs. 1 Crore
2.	2nd Officer/ 2nd Engineer	Rs 2 Crore
3.	Chief Officer/Chief Engineer/Captain	Rs 3-4 Crore
4.	Cadet/Rating	Rs 1 Crore

• As a general rule of thumb, Your Life insurance should ideally be 20 times your Annual Salary.
• It is advised that the Term Insurance cover should be increased every year by the rate of inflation. The average rate of Inflation in India is about 5 %.
• An Important concept of Insurance is that it is only needed if you do not have enough corpus in your Investments. Once you reach a certain required corpus, you may wish to discontinue paying the premium.

3:- Life Insurance Terms

Here is a List of some of the important terms related to term insurance. You must have an idea about these terms:

1. Claim Settlement Ratio: The Claim Settlement Ratio (CSR) is the ratio of the total number of claims raised in a year and the number of claims settled in a year by an insurer. The higher the number, the more reliable the insurance company is, as the chances of your family’s claim being rejected are low.
2. Term insurance premium: This is the money you pay to the insurance company in return for financial protection. Premiums can be made in monthly, half-yearly, and annual installments. Premiums tend to increase as you age.
3. Add-on benefits (riders): To enhance the coverage of your plan, you can add benefits to your plan, such as a critical illness rider, an accidental death rider, or a permanent disability rider. Riders come at a nominal cost over the premium.
4. Sum assured: This is the amount of money that your nominee will receive in case of an unfortunate event. This also determines the premium amount for the term plan
5. Death benefit: This is the same as a sum assured and is given to the nominee in case of an unfortunate eventuality.

A Term Plan with a Critical Illness and disability rider is the most suited for seafarers. Let’s Discuss them in a little detail:

3.1:- Critical Illness Rider

• Critical Illness Rider is an optional add-on that can purchased with the term insurance. A small amount of money will be added to your premium.
• It is a Survival Benefit and you may claim the sum assured in case you are diagnosed with the illnesses mentioned in the policy
• Some of the diseases covered in a Critical Illness Rider are as follows:
  • Cancer,
  • Heart attack,
  • Stroke,
  • Kidney Failure, etc.

3.2:- How does Critical Illness Rider work

Let’s understand this with an example: 

Mr. X  is 25 and buys a Term Insurance of Rs. 1 Crore and gets a critical illness rider for Rs. 20 Lakh till the age of 65. Mr X is a seafarer and at the age of 40, he was diagnosed with Kidney Failure and needs regular dialysis. Due to the critical illness rider, he will receive an instant payout of Rs. 20 Lakh. His regular term policy remains unaffected.

Some companies may deduct this 20 lakh from the sum Assured leaving the policy to be of Rs. 80 Lakhs now.

3.3:- Permanent Disability Rider

• There have been numerous cases when seafarers have lost limbs or have been seriously injured. As a consequence, many have lost their Employability
• To safeguard yourself against the loss of income from such incidents, this rider is added to your existing policy.
• It promises to pay the insured about 1-2% of the ‘sum-assured’ every month for a specific period of years, say 10 Years.
• The income benefits of a disability rider help you sustain your family even in the absence of your income.
• In the event of death, the Nominee generally gets the entire sum assured on top of the disability benefit. You must understand this carefully.

3.4:- Importance of Critical Illness and Disability Rider in Term Insurance 

1. Financial security in times of crisis
2. Income Replacement with the proper amount of coverage
3. Coverage against a wider range of illnesses
4. Additional cover with your health insurance.

4:- Whom to Buy Term Insurance From?

We will discuss the advantages and disadvantages of each of the following sources of buying term insurance but before that you should know some forms that you might need to fill-up when buying a term insurance.  

1. Mariner Questionnaire 
2. Travel Questionnaire 
3. Occupation Questionnaire 
4. MWP ACT  

It is very important to note that not only the insurance product but the claim experience is what you should take into account as well.

4.1:- Policy Bazaar Term Insurance 1 Crore

Advantages:	Disadvantages:
– Direct Comparison for the policy premium – Online Discounts (up to 10 %) – No need for Physical Travel – Seemingly Hassle-free	– Confusion leading to poor choices based on low premium – Limited explanation and specifics from the Sales team. – Misselling may occur – Less reliable and the company may take less responsibility at times of crisis – Limited 2-Way Communication

4.2:- Online Term Insurance

This refers to the process of directly buying the policy from the bank’s website.

Advantages:	Disadvantages:
– Online Discount(5-10%) – Seemingly Hassle-free and easy to buy – Less Physical work	– Less reliable in times of claim settlement. – The company decides a support you who may or may not be a financial advisor – Time-consuming as you would have to invest more time in handling the terms

4.3:- Term Insurance from Agent

Advantages:	Disadvantages:
– Better reliability Better 2-way communication and doubt solving. – Hassle-free claim settlement if the agent is a serious financial advisor. – Reduced efforts in the management of the policy as the agent does it for you	– Bad agents may be commission-focused and may missell. – If the agent is not present anymore or the agent is reluctant, you might face problems.

4.4:- Term Insurance from Mariner Agent

A mariner agent is an insurance agent who might or might not be an active sailor.

The advantages and disadvantages of buying insurance from a Mariner Agent are more or less the same as normal agents if the expertise of the agent is verified.

Some other advantages and disadvantages are as below:

Advantages:	Disadvantages:
A mariner agent will be well versed with your needs as a seafarer as he/she would have gone through the same thing.	An active sailor who might be a financial advisor may not be present in the country when you need them.

5:- MWP Act

• MWP Act stands for Married Women Property Act. It was brought about in 1874.
• This is incorporated for the protection of one’s wife and children.
• The MWP Act says that if a married man, including a divorcee or a widower, buys a life insurance plan with the MWP, the insurance benefits upon maturity or death are the sole property of nominated beneficiaries and no one else, including the policyholder himself, has any right over these benefits.

5.1:- Why the MWP Act?

• Women in Family roles such as Wives, Mothers, Sisters, etc are generally financially dependent on the men of the family. In the case of the untimely death of the Caregiver, there have been instances when Women have been victims of property disputes with in-laws, money lenders, business partners, etc.
• Thus the MWP Act was enacted to prevent the loss of financial independence of Married Women and their children after the demise of the caregiver of the family. 
• The MWP Act, of 1874 was amended in 1923 to include life insurance policies made out in the name of the married woman or her children or both 

6:- Pros and Cons of the MWP Act

PROs:

1. Complete Financial Security for your immediate Family. If the insurance coverage is sufficient, your wife and/or children will never have to worry about Financial instability.
2. There is no change in the premium amount due to the incorporation of the MWP Act in your policy.

Cons:

1. Trustees/Nominees cannot be changed once decided
2. The Nominee will receive the payout even if you are divorced in the future.

Conclusion:

This article should have given you a complete idea about the little nooks and corners of Life Insurance. If you have read the blog, it is safe to assume that you are serious about taking life Insurance and on the correct path to your financial independence. 

As already mentioned, never confuse your life insurance with an investment entity, and make informed decisions. Your Choice will make a difference in the quality of life your family will lead when you are not there to take care of them. 

When buying any insurance think that you are buying your mental peace. A little premium is way cheaper than the cost of your happiness and financial Security

Frequently Asked Questions about Term Insurance

1:- Can I assign existing life insurance under the MWP Act?

• No. Existing Life insurance cannot be assigned under the MWP Act. This is because when you assign an insurance policy under the Act, a trust is created under the nominee’s name

2:- Can parents be added as beneficiaries under the MWP Act?

• No. Parents cannot be added as beneficiaries under the MWP Act. Only Wife and Kids can be added as beneficiaries

3:- When should a mariner apply for term insurance?

•  Ideally, a mariner should apply for term insurance once he/she is not a trainee anymore and has finished a contract as an officer. For Ratings, it should be done after a contract is completed as an O.S. At least.
• The Best scenario is to apply for term insurance right after you sign off as companies look for a steady cash flow in your account.

4:- How to avoid fraud when buying term insurance?

• Simply put, avoid any other plan that is not a Term Plan.
• Ask 100s of questions. It’s your money and life. It’s your right to feel 100% secure about it.
• Look out for agents who try to change the plans for the benefit of extra commission
• Always look for a well-reputed and trusted brand.
• Be informed and scrutinize every little detail to the best of your ability. Make sure you get regular follow-ups from the agent

5:- Is suicide covered by term insurance?  

• Suicide is generally not covered for the first 12 months after the policy is issued. Nowadays most companies cover suicide after the payout of your second annual premium

DISCLAIMER: WE DO NOT PROMOTE TAKING A TERM PLAN JUST TO GET ITs FINANCIAL BENEFIT BY COMMITTING ANY ACTS OF SELF-HARM

6:- Can you take a loan on a Term Life Insurance? 

• Loans are a Strict NO for the entire duration of the policy Term. Understand that insurance companies are giving you a cover against any threat to your life and it can not be counted as a Financial Instrument.

7:- Who should I name as my Beneficiary and why?

One important thing to remember about Term Plans is that the nominees can be changed at any point in time during the duration of the policy.

The percentage breakup of the benefited amount can also be changed flexibly. For example, you take insurance of Rs. 1 Crore. You wish to have a 50-50 split in the sum assured between your spouse and your parents. It is easily possible and can be changed in due course of time.

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