Split Term Cover

Dear Friends, Many a times I & several others had advised to opt split Term Covers. But a common person is not able to understand the logic & benefit offered by split Term Covers. Here I’m discussing the benefit of split Term Cover with the prem. Illustrations of LIC’s Anmol Jeevan Term Plan. 

Let’s assume a normal healthy male aged 30 years wants to take term cover of 60L as per his financial liabilities for next 25 years. The different prem. Quotes (service Tax included in the prem.) are given below. 

 

Table – 1 for LIC Anmol Jeevan Plan

Cover amount

Term

Premium

6000000

25

22928

1500000

25

5732

1500000

20

4841

1500000

15

4217

1500000

10

3846

Split Cover Total Prem.

18636

 

 Now from Table -1,

If the person opts a single cover of 60L Rs. for next 25 years, the prem. Outgo is 22928 Rs. Now imagine the situation after 8-10 years, He thinks there is no need for such high cover & a lower cover of say 40-45L is sufficient. But he can’t do anything bcoz if he opts to stop his current single cover of 60L Rs. the prem. For new cover of 40-45L ‘ll be higher for remaining period as he is taking the cover at later age. If he opts to remain with the single cover, he is paying prem. For the cover he doesn’t require.

Now for split covers of 15L each for 25, 20, 15 & 10 years the total prem. Outgo is18636 Rs. only. On a first hand there is an immediate saving of appx. 4300 Rs. per annum & the best part is after 8-10 years the person in question can simply stop his 10Y 15L policy as per his changed cover requirement. Already he is paying less prem. Every year for split cover than a single cover & after stopping the 10 year policy. There ‘ll be additional saving of 3846 Rs. These saving amounts can be invested for better investment. The same thing can be done to other policies also one by one after passing of some more years. 

 On a concluding note, it’s finally the choice of the person what he wants. The major flip side or should I say negative side of this strategy of split cover is, in case the financial liabilities increase (normally Fin. Liabs. Decreased, but in extra ordinary cases it may increase also), There ‘ll be shortage of cover & the person ‘ll have to take more cover as per his changed liabilities. 

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